Understanding Your Mortgage Documents
Buying a Fort Wayne home comes with a plethora of paperwork that needs to be reviewed and signed. Finding your way through this paperwork can be overwhelming; it is important to know what mortgage documents are what.
Here are the mortgage documents that you will now need to sign, following law changes in 2015.
TRID
In October of 2015 the Consumer Financial Protection Bureau (CFPB) combined all previously required mortgage rate and fee disclosures into two forms. This helped to make it easier for homebuyers to understand their mortgages; they called the initiative the TILA-RESPA Integrated Disclosure Rule (TRID).
This combined the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) both of which protected consumers from fee abuses and prevent housing service providers from giving each other referral fees for your business.
Loan Estimates and Closing Disclosures
The TRID created two forms that need to be signed by buyers: the Loan Estimate and the Closing Disclosure.
One thing you need to know is that the Loan Estimate must be provided to you within three days of your application with the lender. This document gives you the details of the loan terms, projected payments over the life of the mortgage and an itemized list of closing costs.
The Closing Disclosure is to be given to you at least three days before closing on your mortgage and replaces the final settlement statement, the HUD or HUD-1. This document is very similar to the Loan Estimate but with the added breakdown of costs to be paid by the buyer.
This will give you a last chance to review the final terms before you close the sale. Be sure you fully understand your role and your lender’s role when it comes to both of these forms and disclosures prior to closing.
Promissory Note
The promissory note, your loan contract, holds the terms of your loan and will be one of the last documents you sign. The rate, payment intervals, payment changes and will let you know if you will incur any penalties if you pay off the loan early.
The note is your agreement that the Fort Wayne home is a security to the loan, meaning the lender will have a claim to the property if you default on repayment. The note will refer to the mortgage as the security instrument.
Your Mortgage
Your mortgage and a deed of trust agree that the property is security for the note. All mortgages and deeds of trust have three occupancy provisions in which you must comply:
- Second Home – meaning that the home is strictly your second home and it cannot be rented out.
- Non-Owner Occupied – meaning you will be using the home as either a secondary home or a rental, but it also means you’ll pay a higher rate for this loan.
- Owner Occupied – meaning that you will move into the property within 60 days of closing and that it will be your primary residence for the next year.
These four mortgage documents can seem overwhelming when you first start to get into what they entail, but they are essential to the Fort Wayne home buying process. The first step to understanding all of the mortgage documents is to be willing to work with your lender to understand what is expected of you and of them before you sign the documents.
Know what your rights are and what is required of you before you get started in the Fort Wayne home buying process and you’ll find yourself on the right track.