On October 3, 2015, the Consumer Financial Protection Bureau’s (CFPB) new mortgage disclosure law, also known as the TRID went into effect. TRID will help consumers be more informed regarding the closing cost.
Here are 11 things you should know about the new law:
1. Initial Good Faith Estimate (GFE) and Truth in Lending disclosure (TIL) are now combined into one new form called the Loan Estimate (LE).
2. Instead of the old forms such as the HUD-1 and Final TIL we now have the Closing Disclosure (CD). Most major lenders will prepare the CD for the borrower; some however may rely on settlement agents. The new form will describe the loan terms, projected loan payments, closing cost at closing, loan features such as assumption, escrow details, borrower’s liability at foreclosure and others. The Sellers will also have a CD statement.
3. The CD will be provided by the Lender to the consumer/borrower at least three days prior to the scheduled closing date but can be waived if consumer has a “bona fide emergency”.
4. The Lender will now provide the borrower with list of closing service providers so that they can shop for services.
5. If the following changes occur then a new CD must be issued with an additional 3 day waiting period:
APR changes 1/8 of a percent
Pre-payment penalty added to your Note
Loan is changed from fixed to variable, negative amortization
6. Closing fees subject to zero tolerance unless otherwise excepted.
10% tolerance for charges paid to third parties-charges cannot increase by more than 10%
no tolerance-charges can increase without limits if originally disclosed
0% tolerance- charges cannot increase at all
7. How do you determine what category you fall in?
Does lender allow borrower to shop for the third party services? If third party provider is on the bank list, there is a 10% tolerance, if not on the list there is no tolerance.
8. Fees that can’t increase:
fees to brokers or creditor
charges to an affiliate of broker or creditor
charges to an unaffiliated third party – if consumer not allowed to shop
transfer taxes
9. Any variation of the above must be refunded no later than 60 days after closing.
10. Seller will receive CD by or at closing. This will be prepared by the bank attorney in addition to the statement provided by the Seller’s lawyer.
11. TRID will not apply to: HELOCS, Reverse Mortgages, Commercial Loans and lenders who make 5 or less loans per year.
The Closing process will be more organized, with all the numbers worked out about a week prior to closing so there are no surprises on the closing day.
Purchasing a home involves more out-of-pocket expense than just the down payment. There are also closing costs to pay for items such as title policies, recording fees, inspections and fees that a lender charges for obtaining a mortgage. The following schedule is an estimate of the closing costs that a buyer can typically expect to pay at closing.
PURCHASER’S REAL ESTATE CLOSING COSTS:
Taxes: (if applicable)
Mansion Tax 1% of purchase price when $1,000,000 or over
Mortgage Recording Tax (NYC)
• Sales under $500,000 1.8% of entire mortgage
• Sales $500,000 and over 1.925% of entire mortgage
Note: Click here to view table of mortgage recording tax amounts by county. Mortgage recording tax does not apply for cooperative apartment purchases.
Mortgage Associated Fees:
Origination Costs – points varies, usually 0 - 3% value of loan
Appraisal $350 (approx)
Underwriting $450 (approx)
Processing $450 (approx)
Application $350 (approx)
Bank Attorney $850 + up
Real Estate Tax Escrow 2-6 months
Short Term Interest varies, depends on the day of the month in which the closing
occurs
Title Insurance Fees:
Owner and Lender Title Policies 5% - 7% of purchase price (approx)
Municipal Searches $450 (approx)
Deed Recording $375-950 (approx based on county)
Real Estate Taxes varies
Note: Purchasers of cooperative apartments usually do not purchase title insurance, and instead pay for a lien search which is approximately $450. However, see our blog entry, Co-op Buyers Should-Consider Purchasing Title Insurance, which explains particular situations in which it is advisable for purchasers of cooperative apartments to purchase a type of title insurance policy called an Eagle 9 policy.
Homeowner’s Insurance:
Policy varies depending on lender's required coverage and purchase
price
Home Inspection:
Home and Termite Inspection $450 (approx)
Legal Fees:
Purchaser's Attorney fee varies, but usually flat-fee basis (consult with your
attorney)
To speak with an experienced real estate attorney about a closing, call us at (516) 314-8433. To learn more about our real estate closing services visit us at: https://www.jreardonlaw.com/residential-real-estate-closings
The following schedule shows estimated closing costs when selling real estate. These costs are just estimates and should be reviewed with your attorney.
SELLER’S REAL ESTATE CLOSING COSTS:
Transfer Taxes:
NYS Real Property Transfer Tax 0.4% (.004) of purchase price
NYC Real Property Transfer Tax
(Usually paid by Seller, except on new contruction sale)
• Sales under $500,000 1% of purchase price
• Sales $500,000 and over 1.425% of purchase price
Non-Resident Gains Tax Withholding
(out of state seller) 8.82% of gain
Non-US Resident (FIRPTA) 10% / 15% of price withheld or paid
Mortgage Payoff Fees: (if applicable)
Pick-up/payoff fee $150-$250 each
Recording Satisfaction $100-$300 each
Real Estate Broker Fee:
Commission 6% of purchase price (negotiable)
Legal Fees:
Seller's Attorney fee varies, but usually flat-fee basis (consult with your
attorney)
To speak with an experienced real estate attorney about a closing, call us at (516) 314-8433. To learn more about our real estate closing services visit us at: https://www.jreardonlaw.com/residential-real-estate-closings