If you’re going to be buying a home in the near future there are several different disclosures and documents you’ll be asked to sign. Unless you are in the financial industry yourself these can seem like they’re in a totally different language. Working as a Cherokee County real estate agent I often explain to my buyers what to expect during the home buying process. I try to put things in laymen’s terms so that it’s not so intimidating.
Back in 1974 the government established what’s now known as RESPA – The Real Estate Settlement Procedures Act. It is there to protect consumers. There was also something called the Truth In Lending Act, designed to disclose to borrowers all the fees they’d be charged for the privilege of borrowing money for the next 30 years to pay off a mortgage and to help them compare loan packages offered by different lenders. In October 2015 they were combined into something called the TILA-RESPA Integrated Disclosure – aka TRID.
The idea behind TRID was to make it easier for borrowers to understand the costs and fees associated with borrowing money to buy a home. Which is great! But there have been some unintended side effects too. So let’s talk about what the new disclosures are that you’ll be getting and how they impact your home purchase.
The Loan Estimate
This is a document that spells out the terms of your loan – how many years you have to repay it, your interest rate, the fees involved. You are required to get this within 3 days of applying for a loan. In the Atlanta area you may already be pre approved for a loan but once you make an offer that gets accepted and we officially go under contract, that’s when you’ll fill out a loan application based on the sales price of this particular house. You’ll get the loan estimate within 3 days. Review this carefully and make sure you understand the terms of the loan and what you’re being charged.
Please note that the lowest interest rate is not always the best deal! The lender could charge a lower interest rate but make you pay lots of loan origination fees. If you don’t have a ton of money saved up for your closing costs and the seller won’t pay them for you, the lender can do it by giving you a credit toward those closing costs. They do this by raising the interest rate a bit. So look at the total package offered by the lender, not just the interest rate.
There is a mandatory 7 day waiting period after the loan estimate is delivered to the borrower before any further work on the loan can be done.
The Closing Disclosure (aka CD)
This is one more “this is what you’re paying” disclosure, only this comes right before you close on your house. It shows who is paying what – what’s being paid by the seller, the buyer, and third parties.
In Georgia the lender and the closing attorney coordinate to make sure all the information is correct before this document is generated. Then it gets sent to the buyer to sign. The closing CANNOT HAPPEN earlier than three days after signing the CD, so if you are scheduled to close on a Friday the CD has to be signed no later than Tuesday in order to close on time.
This has been a happy little side effect of TRID going into effect – not. It means the lender and closing attorney have to be on top of things in order to get the CD sent out at least 3 days prior to the closing date. This is where a great Realtor® comes in. We gently remind (ok, nag) them when the deadline is looming so that no one drops the ball. A great closing attorney and a great lender can ease the stress involved in this purchase considerably.
The Promissory Note
This is the actual promise of payment made to your chosen lender. It goes into great detail about what is owed, your schedule for repayment, and what happens if you fail to pay (they will foreclose on your house and take it back.)
The Security Instrument
This document gives the lender the power to foreclose on the property if the loan is not repaid.
Consequences of TRID
On the old settlement statement there was room for additional things like the seller giving a $2000 carpet allowance to the buyer so that they could replace the bedroom carpet after closing. On the new CD there is no place for things like that. Many lenders are not allowing any sort of credit to the buyer now for this reason.
Then there’s the timeline. The 7 day waiting period after the loan estimate is delivered means the lender cannot order the appraisal. The 3 days between delivery of the CD and closing has already been discussed. If the annual percentage rate (APR) changes more than 1/8 of a percent since the loan estimate was given to the buyer there is another mandatory 3 day period during which the borrower has time to review the new price structure. All these additional required time delays mean closing in 30 days is a real stretch these days. Better to plan on 45 days.
Education is key!
Working with a reputable lender and experienced Realtor® will alleviate most of the confusion and stress in buying a new home. It’s normal to be nervous about committing to spending this kind of money. Which is why it’s so important to choose a reputable lender, not someone who will push you into a loan that makes THEM more money but is a very poor loan choice for YOU. I’m looking at you, Neg-Am loans from the early 2000’s!
My job as your Realtor® in the process is to be your ally, to fight for your best interests, and make buying a home as enjoyable and stress free as possible. I mean, let’s be honest – just about anyone who can fog a mirror can get a real estate license. But a true professional with many years of experience can be the difference between losing the house once you’re under contract due to unforeseen issues and living there happily ever after!
Additional Helpful Articles
How to buy a house when you think you can’t afford it
From Renter to Homeowner – How to buy your first home
Are you thinking of selling your home? I’m very good at marketing homes to sell quickly, and for more money. If you’re a first-time home buyer then you’ll be in good hands. I’ve helped countless first-time home buyers through the entire process of buying that first home! I have a real passion for helping folks buy and sell homes here in the great state of Georgia and I would love to connect with you!
I help people buy and sell real estate in the following north Georgia cities: Acworth, Ball Ground, Canton, Kennesaw, Woodstock, White, Roswell, Milton, Alpharetta, Dallas, Powder Springs.
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