TRID, which is short for TILA-RESPA Integrated Disclosure, is the federal rule that governs the mortgage process for consumer borrowers. In short, TRID determines the disclosure documents that borrowers receive when they get a mortgage and effectively determines the how the mortgage process works. TRID also impacts what types of mortgages are available to borrowers as well as the interest rate and fees you pay. TRID is also called the Know Before You Owe rule because it covers the documents and information borrowers should review before they move forward with a mortgage, which is a major financial commitment. TRID was developed by the government in response to the mortgage and real estate crisis and is designed to increase transparency in the mortgage process and protect borrowers from predatory lending and fraud. We provide a comprehensive overview of the TRID rule for you to review.
Except for home equity loans, mobile home loans and reverse mortgages, TRID applies to any consumer loan secured by real property, so the rule applies to almost all mortgage products including loans to purchase land or vacant lots. The definition of real property is relatively broad but simply put it is property where you can live or intend to live such as a home, condominium, co-op, a manufactured home on a permanent foundation, multifamily property with up to four units or land, including a lot where you plan to build a home in the future. If you are getting a loan to secured by any of these types of properties, then the lender must follow TRID rule guidelines.
So the TRID mortgage rule applies to both land loans as well as construction-to-permanent (C2P) loans even though you may not live on the property immediately after your mortgage closes. The Consumer Finance Protection Bureau (CFPB), which is the government agency that implements TRID, issued a bulletin in 2016 that clarifies that TRID does indeed apply to construction loans.
Please note that the TRID mortgage rule only applies to consumer loans and not commercial transactions such as acquiring land for the purpose of building a property with more than four units. So if you are a developer that wants to finance the purchase of land to build an apartment building, then a different set or regulations apply to that loan. Additionally, if you are buying a multifamily property with five or more units then TRID does not apply to the loan even if you intend to occupy one of the units as your primary residence.
If you have a unique loan or property situation, we recommend that you contact the CFPB for clarification and to understand the regulations that apply to the financing transaction.