Does the TRID mortgage rule apply to land purchases?
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 you receive when you get a mortgage and effectively determines the how the mortgage process works.
TRID was developed by the government in response to the real estate crisis in 2008 and is designed to increase transparency in the mortgage process and to protect borrowers from predatory lending and fraud. The law also covers what types of loan programs 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 regulates the documents and information lenders are required to provide to you before you move forward with a mortgage.
TRID applies to any consumer loan secured by real property, except for home equity loans, mobile home loans and reverse mortgages. To answer your specific question, this means TRID applies to almost all mortgage products including loans to purchase land or vacant lots. Simply put, the definition of real property is property where you can live or intend to live including the following:
single family home
condominium
co-op
manufactured home on a permanent foundation
multifamily property with up to four units
land, including a lot where you plan to build a home in the future
timeshare (different guidelines apply)
If you apply for a loan secured by any of these types of properties, then the lender must follow TRID guidelines.
So the TRID mortgage rule applies to both land loans as well as construction and construction-to-permanent (C2P) loans even though you may not live on the property immediately after your mortgage closes. In fact, the Consumer Financial 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.
Review What is TRID?
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, a different set or regulations apply to that loan. Additionally, if you are buying a multifamily property with five or more units,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 financing or property situation, we recommend that you contact the CFPB for clarification of the regulations that apply to your specific loan.
Sources
“Know Before You Owe Mortgage Disclosures and Construction Loans.” CFPB. Consumer Financial Protection Bureau, January 2016. Web.
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