TRID Rules
TRID is an acronym for the TILA-RESPA Integrated Disclosure rule. TRID became law as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). In accordance with TRID, there are several things affecting potential borrowers.
When has a loan application been made? When the following six pieces of information have been provided to the Lender: (1) Consumer’s Name (2) Monthly Income (3) Social Security Number (4) The Property Address (5) An Estimate of the Value of the Property (6) The Loan Amount.
Once the above reference information has been supplied to the Lender, the Lender must provide the borrower with a “Loan Estimate” within 3 business days unless Lender denies the loan or borrower withdraws the application. The CFPB booklet “Your Home Loan Toolkit” is also required to be given within 3 days.
Within days of receiving the “Loan Estimate” the borrower must provide the Lender with their intent to proceed. Until the Lender is in receipt of the “intent to proceed” they cannot pay any fees except, a fee for initial credit report.
Things to consider
If you are thinking about applying for mortgage approval in the near future, now is not a good time to change careers, move your money around, have unusually large deposits or buy big-ticket items. Lenders like stability. If you are considering any major changes, it pays to meet with a lender and ask them how to proceed before you make any changes. Unless you have a firm grip on your qualifying ratios, now is not the time to purchase a big-ticket item such as a new car.
Your TCB agent will provide you with a computer analysis detailing your mortgage options and the underlining ratios.
Loan Application Documents
Prior to making formal loan application, you should make ready the following documents: (1) W2’s or 1099 (2) Two years Income Tax form 1040 (3) Two months Bank Statements (4) Revolving credit card statements (5) Any personal loan documents – such as auto loans or student loans (6) 2 most recent paystubs (7) Alimony or child care documentation.
You need not worry about things such as: (1) life insurance (2) health insurance (3) utility bills (4) cable bills (5) car insurance. You should confirm required documentation with your Lender prior to application. If you don’t want delays in the process then you must be proactive and be ready to make a complete loan application.
Gift Letters
If you are utilizing a gift as part of your down payment or closing cost then you must obtain a letter from the donor with the following information.
- The donor’s name, current address and home phone number
- The donor’s relationship to the client (e.g. card is signed, “Love, Mom & Dad”)
- The exact dollar amount enclosed
- The date of the fund transfer (in legible format MM-DD-YYYY)
- A clear statement from the donor expressing that no repayment is expected
- The donor’s clear signature
- The address of the property to be purchased
Some Lenders will also verify the donor’s capacity to give. In words, they will verify the donor’s bank statements.
Formal Loan Application Checklist
1. Paystubs: Most Recent
Depending on how you get paid. You will need the following:
Paid every week: Your last five pay stubs
Paid every 2 weeks: Your last three pay stubs
Paid Monthly: Your last pay stub
2. Two most recent W-2 forms
In order for you to calculate your taxes, your employer gives your W-2 to you, every year.
A copy of your W-2 should be attached to your tax return, so you should be able to find it there.
If you filed electronically, you, or your tax preparer should have a copy of your W-2.
3. Three months of your most recent bank and investment statements
Be sure to copy all pages of your statements (front and back). If you don’t receive paper statements, please print your entire online statement. Don’t forget to include all of your accounts (checking, savings and investments). Your accounts must show that you have enough money to afford your down payment and several mortgage payments. You will need to provide a detailed letter to explain any large deposits or withdrawals. Double check! Are the three months of statements the most recent?
4. A completed and signed Form 4506-T or 4506T-EZ
Your Loan officer will give you this form. (It gives the Lender authorization to access your tax return.)
5. Completely executed contract between you and the seller, including all addendums.
6. Note self-employed or if you get paid any commissions.
You also need your most recent two years of tax returns, signed. Don’t forget to include all pages and schedules. State tax returns are not required. If you own a business, you will also need the most recent two years of personal tax returns and any business returns you filed for your company (e.g., 1120, 1120S, Schedule K-1 / 1065). If you filed electronically, you can print a copy from your tax software or ask your tax preparer. If you own your own business, you should have available most recent profit and loss statement. Double check! Do all your returns have your signature? Have you included two years?
7. Money needed at application.
You will be required to pay for credit reports (for you and co-borrower) approximately $60. You will be required to pay for the property appraisal which will be in the $400-$500 range. We do not advise you work with a Lender that charges a “mortgage application” fee.
8. Loan Processing
Your loan officer will submit the complete loan application to a company loan processor. The loan processor will check for any missing information or documentation. They will order the property appraisal. When the file is complete, the processor will forward the file to the underwriter.
9. Underwriting the loan.
An underwriter is a financial expert who takes a look at your finances and assesses how much risk a lender will take on if they decide to give you a loan. More specifically, underwriters evaluate your credit history, assets, size of the loan you request, and how well they anticipate that you can pay back your loan. Your application will probably be submitted to an automated underwriting system. This is a sophisticated software system that renders preliminary underwriting decisions. The system lets the human underwriter know if a mortgage applicant meets the lender’s guidelines, based on information from the loan application and credit reports. The underwriter may request clarification or more documentation prior to rendering a final decision. The goal is to obtain a “mortgage approval letter” or “loan commitment”.
10. Closing
Your TCB agent will coordinate with the Title Company to arrangement for settlement on your new home. The Lender will send Lender’s closing instructions and the mortgage documents to the Title Company.