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Free TRID Course: Learn How to Go Through the Loan Estimate - Notary Signing Agent Training - YouTube
Channel: Mark Wills
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I'm frequently asked, "What is a TRID disclosure?"
(or, T R I D) Now, there are courses out there
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that will charge you for TRID training but
I'm going to train you in this video for absolutely
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free. So, what is TRID? Now I can't talk about
TRID without talking about the CFPB, or Consumer
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Financial Protection Bureau. And just as their
name alludes, this bureau within the Federal
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Reserve regulates financial products such
as mortgages. The CFPB created TRID disclosures
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to make the loan mortgage cost much more transparent
for the borrowers. So, what are TRID disclosures?
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First off, it stands for Tila-Respa Integrated
Disclosure, T R I D. There are two disclosures
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you should know about and be familiar with
— the loan estimate and the closing disclosure.
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What is nice about the new forms is that they
clearly detail the loan amount, terms, and
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features, such whether there's an early pre-payment
penalty or not. So let's start by talking
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about the loan estimate, which replaces the
GFE and the estimate TIL that used to be sent
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out to borrowers. This loan estimate document
is due to the buyer 3 days after applying
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for the loan. It is not a promise to lend
but an estimate of costs so they can easily
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comparison shop from bank to bank. I'll show
you how to understand the loan estimate and
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go over it with you right now. So this is
an exact loan estimate a borrower would see,
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keep in mind you will rarely see these because
loan estimates are sent directly to the borrower
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3 days after they apply for the loan. But
since this is a TRID training, I want to show
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you exactly how you would read a loan estimate
and how it is interpreted by the borrower
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so if you ever see this, you know how to interpret
it as well. It is very simple and very black
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and white to understand, just start from the
top and go to the bottom. So it's very black
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and white — date issued, that's the date
this loan estimate was issued to the borrower,
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this is the people applying for the loan,
this is the property associated with this
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mortgage, this is the estimated value of the
property associated with this mortgage, this
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is the loan term, 30, 20, 15, type of loan
this is, refinance or purchase, the kind of
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product whether it be a fixed or variable,
the type of loan it is, whether it's conventional,
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FHA, or VA, the loan number the bank has assigned
to this loan application, and ultimately when
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the rate lock would expire for the loan that
they've applied for. So it's very black and
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white information as you can see. And it's
just as easy to read as you go down the sheet.
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Let's start with loan terms. It simply tells
the borrower the amount they're applying for,
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$150,000. The interest rate they qualify for,
it tells them the monthly principal and interest,
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it tells them when this amount increase after
closing, and it shows them whether there's
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a pre-payment or balloon payment or not. Very
simple to read as you can see. Then projected
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payments, now the reason this column would
be different than the monthly principal and
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interest is if there's an impound account
or PMI mortgage insurance. This borrower has
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mortgage insurance and a taxed escrow account.
So this shows the borrower the total monthly
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payment after PMI and taxes. This column shows
what the payment will be after the PMI disappears
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and so it goes down. But once again, it's
very easy to read (projected monthly payments,
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principal & interest, plus mortgage insurance,
plus any property taxes and insurance for
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total month payment). The next tells the borrower
whether it's going to be an impounded loan
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or not, escrow, yes or no, and they both say
yes. The bottom sheet tells the borrower how
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much the closing costs are going to be and
the very last column shows the borrower whether
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there's going to be money coming to them or
money coming from them. In this case, this
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borrower is getting $24,000 cash out. But
as you can see this loan estimate is very
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simple to read, I will show you how they come
up with this number, the estimated closing
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cost and the estimated cash to close in a
moment, but what you should understand is
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how simple this is to see loan terms, and
this is the sheet they compare bank to bank
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to make sure they're getting the best deal
with whatever lender that they're going with.
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So that's how you read the front page of the
loan estimate. So let's go to the second page
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and I'll show you how they come up with these
two figures, the closing costs and the estimated
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cash to close. The second page is broken down
into three major tabs, loan costs, other costs,
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calculating cash to close. So what is the
difference between other costs and loan costs?
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Loan costs are considered fees that are costing
them to get the loan. Other costs would be
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considered loan fees that are just associated
with having a mortgage, not associated with
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the cost to get the loan itself. For instance,
insurance, that's not a closing cost, that's
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just a mortgage cost. Whether you have a house
or not, you have to pay interest. Whether
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there is property taxes being impounded, that's
not a closing cost, that's an other costs
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because that's just an association of having
the house. But an appraisal fee is a hard
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cost, a credit report is a hard cost, so these
are the fees it's technically costing to get
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the loan, and these are fees that are just
associated with being a home owner. So let's
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talk about this column first, this is very
nicely broken down into what's being charged
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and they can compare these to other lenders
if they see the same form. So starting at
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the top, these are origination fees, these
are fees that the bank's charging to get the
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loan. So in this case it would be a point,
half point would be the application fee, the
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origination fee, and the underwriting fee.
Now these are fees that are third party fees
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that they have to get to get the loan, which
are vendors that the bank usually works with,
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that's why they cannot shop for these. So
these are fixed costs the bank chooses as
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vendors and they're kind of stuck with these
fees — and it's the appraisal, credit report,
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flood determination, flood monitoring, tax
monitoring, and tax status research fee. These
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fees they cannot shop for because these are
vendors already pre-chosen by the lender.
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Now, Part C is telling the borrower that they
can shop for these fees. These fees aren't
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fixed, if they want to find a cheaper pest
inspection company, they can. If they want
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to find a cheaper title search company, they
can. These are fees they can shop for. If
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they choose not to shop for them, these are
the fees the vendors they usually work with
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charge. And so it breaks down the pest inspection
fee, the title insurance binder fee, the lender's
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title policy fee, the settlement agent fee,
and the title search fee. And so each section
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is very nicely added up for the borrower.
So these three numbers here equal the total
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loan costs, or more specifically the fees
in the cost of getting this refinance. Other
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costs, once again, these are just fees associated
with owning a home which would be recording
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costs, homeowners insurance, mortgage insurance,
interest due on the new loan, and property
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taxes, and it shows the initial escrow allotment
they need to put at closing, and so once again
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it's very nicely tallied up on what's charging
what and what's costing them. And that's the
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total fee here. So if you take $2078 plus
$3521, that's how they get to $5599. Now,
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the borrower is getting a credit of $500 so
they subtract the $500 credit and that gives
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them a total closing cost of $5099. Go to
the front page and what do you see? The $5099.
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So the bank has very beautifully told them
what this $5099 is broken down into individually,
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what are considered loan costs and what's
considered other costs but more specifically,
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what are the total costs. And so that's how
they come up with an estimate of $5099. So
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your next question should be, how do they
come up with the estimated $24,901 given to
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the borrower at closing? That's also on the
second page. So what they do is they start
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at the loan amount, $150,000, which we've
already seen. They subtract the $5000 from
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the $150,000 and they subtract the estimated
balance that they're refinancing, or what
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the borrower currently owes on the house.
So if you subtract these two numbers from
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the $150,000, that means there's a surplus
of $24, 901 and that is what is going to the
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borrower at close. So this is how you read
a loan estimate, As you can see, all the borrower
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really needs to do is compare this front sheet
when they comparison shop because these are
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the black and white numbers. What's the loan
amount? What's the interest rate? What's the
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principal & interest? What's the total monthly
payment? What's the total closing cost? What's
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the total cash that the borrower is receiving
back? They just use this front page to comparison
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shop and TRID has really made it easy for
a borrower to be transparent with the costs
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to they know exactly what they're comparing
bank to bank. Now you can see how easy it
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is for a borrower to see the terms and costs
associated with the loan they've applied for.
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All they need to do is compare the front page
of the loan estimate from bank to bank to
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know what the best deal out there is. Every
lender is required to present this three days
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after the borrower applies for the loan, making
it easy to find the mortgage that's best for
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them. Now let's talk about the closing disclosure.
The closing disclosure replaces the truth
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in lending disclosure in the HUD 1 settlement
statement that used to be sent out to borrowers.
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A closing disclosure is similar to the loan
estimate in that it details the loan amount,
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project monthly payments, and how much a borrower
pays in closing costs. But the biggest difference
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is the borrower has been approved and these
are the final loan terms and closing costs.
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The lender is required to send the closing
disclosure three days before the borrower
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signs loan documents. The three day window
allows the borrower time to understand their
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final terms and costs and compare those costs
to the loan estimate they received earlier.
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The three days also gives the borrower time
to ask their lenders any questions before
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they go to the closing table. And this is
why the new closing disclosure is one of the
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best things to happen to the loan signing
industry. The closing disclosure needs to
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match the closing statement that is sent out
with loan documents and since the borrower
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has received the closing disclosure at least
three days before we meet, they should know
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exactly what their fees already are before
you even walk into the signing. Therefore,
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their questions should be answered before
you even show up, reducing the time of our
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loan signings. So now, let's go over the closing
disclosure and I'm going to show you exactly
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how to understand this form. Unlike other
courses, i just TRID trained you for absolutely
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nothing. Imagine what you'll learn in my Loan
Signing System course — your step-by-step
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guide to doing a perfect loan signing and
getting more loan signings and making money
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working for yourself as a loan sining agent.
To take your loan signing agent career to
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the next level, click on the link on this
video and get the Loan Signing System course
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today. I'm Mark, I look forward to helping
you become a top loan signing agent.
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