What Is TRID, And Why Should I Care?

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Have you bought or sold a home in the last forty years? Aside from interest rates and loan products, not much has changed in the home-buying process during that time. But some important changes are on their way, thanks to the Consumer Financial Protection Bureau (CFPB). They're called the Truth in Lending Act (TILA) - Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure, or TRID for short...because there weren't enough acronyms already.

To download a handy booklet that covers everything a consumer would need to know about TRID, head over to the CFPB website and look for the "Your Home Loan Toolkit" PDF brochure. I'll go over the highlights for you:

• Today, many real estate contracts request a closing date 30 days out. When TRID goes into effect on October 3rd, lenders and title companies are recommending that you allow an extra week or two on the contract to ensure compliance with new government mandated waiting periods that are designed to allow consumers adequate time to review loan information prior to closing.
• As a buyer, you'll probably be asked by your lender to sign documents electronically since that will be the most practical way to comply with the new laws.
• The preapproval process remains unchanged, for the most part. Although lenders are now prohibited from requiring income information to provide a Loan Estimate (LE), a smart buyer should know that the most solid loan preapproval will be based on that income information. So make sure you're being open with your loan officer!
• Sometimes under the current laws, the loan is processed well before the closing date, and you get to close early! That's going to be pretty unlikely under the new rules, because the closing date determines some of the information on the Closing Disclosure (CD) and the lender needs to provide the CD to the borrower no later than 3 days prior to closing (including Saturdays for some lenders, excluding Sundays and federal holidays for all lenders).

While there is a lot more to say about TRID, very little of it will be seen by the average consumer. My advice is to make sure you're ready to act quickly once you've chosen a home: provide all the details to your loan officer, get an estimate on homeowner's insurance, and make sure your Realtor is communicating with the lender and the title company on a regular basis.

Something Will Always Go Wrong

It may be an upside-down electrical outlet, last second title issues, or an incorrect item on your HUD-1 settlement statement, but at some point when you're buying or selling a home there will be a problem. When it happens, even if you're tempted to think that the sky is falling, take a deep breath and remember: if buying and selling a home was easy, no one would ever complain about it.

Preparing your response to the issue that may or may not resemble a wrecking ball to your plans takes some guidance, hopefully from your awesome Realtor. First, determine how important the issue is -- not in principle, but in fact. Is it important enough to walk away from the sale? To delay closing until it's rectified? To aggravate the other party further? If you are considering anything else, such as what your mother will say (if you tell her) or your pride, just stop. That's not helping anyone. You have signed a legal contract. If you're considering doing anything to change the terms of that contract or delay its execution, there can be expensive consequences.

Next, brainstorm possible solutions to the problem that would make you more comfortable with the situation, and consider how the other party might respond to each one. Focus on reasonable and quick solutions that won't 1) send a loan back to underwriting, or 2) alienate the other party to such an extent that they refuse to work with you. Did the seller not fix something that was agreed upon in the contract? Offer to send your own contractor, or have the repair funds held in escrow by the closing agent until the work is done.

Remember, nothing is final until all parties have signed the paperwork. If you have a serious issue in your real estate transaction, talk to your Realtor and a real estate attorney if necessary to understand all the options. There is nearly always a solution, and it's our job to help you find it.

The Waiting Game

At the beginning of a real estate transaction, both buyer and seller have a lot to do and plenty of paperwork to sign. After the contract, there's the inspection period and possibly even more paperwork! Next is the appraisal, scheduled through the lender, which takes a bit more time and the buyer and seller don't end up signing anything more unless it comes in too low. But once that's settled, most buyers and sellers feel that the excitement has suddenly dropped off...it could be weeks before closing. What should the buyer and seller be doing after the appraisal?

Essentially, during this period you're waiting for the title company to research the title on the property. They're also communicating with lenders from both sides of the transaction to prepare the necessary closing paperwork. The buyer's lender is also working to pass the file to underwriting, the magical department that gives final approval for your mortgage. Your Realtor is the conduit, communicating regularly with the lender, the title company, and you. However, just because you're waiting on all those people to do their jobs doesn't mean the buyer and seller are done.

Now is the time to really focus on your upcoming move. Pack those boxes, pick a mover, notify the utility companies, file your change of address with the USPS, and make all or your plans for pet care, child care, and time off work to make sure you are ready for moving day. If you already know that you plan to make repairs or renovations at your new home, you can start talking to contractors to determine who will be available and within your price range.  You can also inform your credit card companies and your employer that you will have a new address as of the occupancy date in your contract. Most importantly, you don't want to be that person who is still cleaning the house at 5:30am the day of closing, so find a cleaning company to give the house a thorough once-over if you're the seller (or if you're the buyer of a distressed property)!

Let a Multifamily Property Pay Your Mortgage

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Rents are rising, and if you pay any attention at all to the news, you'll hear that renters are starting to look more actively for homes to purchase. I was lucky enough to sell my home in California to a woman weary of exorbitant rents in San Francisco back in 2013...and the Midwest (including Cincinnati) is starting to see the same trend. For some, the idea of owning a home rather than paying someone else's mortgage is their version of the American dream. For others, though, the responsibilities and maintenance costs associated with owning a single family home are downright frightening.

Pro tip: You can use the same type of mortgage financing -- even FHA! -- to purchase a 2-4 unit building in Ohio as you would to buy a single family home.

By living in one unit and renting out the others, you'll have a ready-made income stream to help you pay your mortgage and make periodic improvements to the property. You'll be able to balance the peace of mind that comes from knowing who's responsible for fixing things with the security of tenants paying their own utilities (this may vary by building) and ultimately contributing to your bottom line. Renters will likely prefer living in the same building as the owner, because they know you will be even more invested in making sure the place is livable. This would also be a great solution if you're self-employed, or if you want to stay home with the kid(s). And best of all, when you're ready for a single family home of your very own, you'll still have this awesome income property!

The downside? Obviously, you won't have as much privacy in a multifamily as you would in a single family home. You'll also need to learn all the ins and outs of being a landlord, such as tenants' rights, housing discrimination laws, calculating and tracking your rental income, rental deposit limits and record keeping, and so on. And you'll still be responsible for any major repairs just as you would be with a single family home.

Choosing the right multifamily will depend on your particular needs and skill set. If you're going to live there, it will need to be in a neighborhood you like and would enjoy living in; the more popular the better if you want to attract a constant stream of tenants! If you're not too handy and the thought of following YouTube video tutorials makes you squirm, try looking for a building that has been recently updated and has no significant inspection issues -- it may cost more up front, but it will give you time to either develop handyman skills or find a good one to keep on call. Other good things to consider during your search would be parking, public transportation access, and available storage. 

Do you have a story about owning and occupying a multifamily? Tell me in the comments!