UNDERSTANDING THE RESIDENTIAL LOAN PROCESS FOR 1-4 UNITS
Acronyms:
LE – Loan Estimate
CD – Closing Disclosure
TRID – Truth-in-Lending, Respa, Integrated Disclosure
RESPA – Real Estate Settlement Procedure Act
Step 1: Once the lender has taken a loan application with the property address and requested loan amount defined (property is under contract) the Loan Disclosure (LE) needs to be provided to the Buyer/Borrower within three business days. The Buyer(s) needs to consent to continue with the loan after receipt of the LE and the loan can be processed from there.
Step 2: The Lender, if not already requested, will need W2’s, Tax Returns and Bank Statements from Buyer/Borrower. The appraisal will be conducted. Various other processing will need to be performed, including all items previously noted from Escrow Holder. Once all the items needed are provided to the Lender, the loan package is submitted to Underwriting for Final Loan Approval.
Step 3: The Closing Disclosure (CD) is sent (usually) to Escrow for final balancing, then the CD is sent to Buyer/Borrower for final approval and signature. Loan documents can be signed 3 business days after the lender receives Buyer’s approval and acknowledgement of receipt of the CD.
Step 4: Loan Documents signed by Buyer/Borrower, sent to Lender for review either by secure email or overnight mail. Lender will provide Escrow with final Funding requirements. When all conditions are met, the loan is funded and recorded as soon as possible.
TRID
There was much concern in the Real Estate Settlement Industry with the introduction of the TRID to the settlement procedure, but most people in this industry have been pleasantly surprised.
The timelines are important to take note of. The LE must be provided within 3 days of completed loan application. Any significant changes will start the disclosure time requirements over.
The CD needs to be acknowledged by the buyer(s) 3 business days before signing loan documents.
If the Lenders seem to be asking for crazy items, be patient. Lenders are subject to the following penalties, and they have every right to be extra cautious:
Honest error or mistake in the CD……………………………………………………..$5,000.00 per day until corrected
Reckless error……………………………………………….…………………………………$25,000.00 per day until corrected
Knowing, intentional error………………………………..………………………..$1,000,000.00 per day until corrected
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