What Is the 3-7-3 Rule in Mortgage? TRID Disclosure Timing Guide
The 3-7-3 rule is a critical component of mortgage lending that governs the timing of key disclosures during your loan process. This rule stems from the TILA-RESPA Integrated Disclosure (TRID) regulations implemented by the Consumer Financial Protection Bureau, designed to give borrowers adequate time to review and understand their loan terms before committing to one of the largest financial decisions of their lives.
Understanding the 3-7-3 rule is essential whether you're securing a traditional mortgage or navigating the more complex timeline of a construction loan. At Clear House Lending, we guide borrowers through these disclosure requirements daily, ensuring compliance while keeping your project on schedule.
In this comprehensive guide, we'll break down each component of the 3-7-3 rule, explain how it affects your closing timeline, and provide strategies for construction loan borrowers to avoid costly delays.
The 3-7-3 Rule at a Glance
These three numbers represent the minimum business days required at different stages of your mortgage process. The rule ensures you have adequate time to receive, review, and respond to important loan documents before you're obligated to proceed with closing. Understanding these timeframes is crucial for planning your construction project start date.
Breaking Down the 3-7-3 Rule
The 3-7-3 rule consists of three distinct timing requirements that work together to protect borrowers. Let's examine each component in detail.
The First "3": Loan Estimate Delivery
Within three business days of receiving your complete loan application, your lender must provide you with a Loan Estimate (LE). This standardized three-page document replaced the previous Good Faith Estimate and provides:
- Loan Terms: Interest rate, monthly payment, and loan features
- Projected Payments: How your payment may change over time
- Closing Costs: Itemized estimate of fees you'll pay at closing
- Comparisons: APR, total interest percentage, and total cost over 5 years
- Other Considerations: Appraisal, assumption policy, and late payment information
The Loan Estimate allows you to compare offers from multiple lenders using a consistent format. For construction loans, this document will reflect the terms of your construction-to-permanent financing structure.
What Triggers the 3-Day Clock?
Your application is considered "received" when the lender has six specific pieces of information:
- Your name
- Your income
- Your Social Security number (for credit check)
- The property address
- An estimate of the property's value
- The loan amount you're seeking
Until all six elements are received, the 3-day countdown doesn't begin.
The "7": Waiting Period Before Closing
After you receive your Loan Estimate, you must wait at least seven business days before closing on your loan. This waiting period serves several purposes:
- Comparison Shopping: Time to obtain and compare Loan Estimates from other lenders
- Document Review: Opportunity to carefully review terms and ask questions
- Negotiation: Window to negotiate fees or request price matching
- Preparation: Time to gather additional required documentation
For traditional mortgages, this seven-day period typically doesn't create issues since most closings take 30-45 days. However, construction loan borrowers sometimes face tighter timelines, especially when coordinating with builders, contractors, and seasonal weather windows.
Important Note on Business Days
For the seven-day waiting period, business days include all calendar days except Sundays and federal public holidays. Saturday is counted as a business day for this purpose.
The Second "3": Closing Disclosure Review Period
At least three business days before your scheduled closing, you must receive the Closing Disclosure (CD). This five-page document provides the final details of your loan and replaces the previously used HUD-1 Settlement Statement.
The Closing Disclosure includes:
- Final Loan Terms: Locked interest rate and exact payment amounts
- Actual Closing Costs: Finalized fees with comparison to Loan Estimate
- Cash to Close: Exact amount needed at closing
- Summary of Transactions: Complete accounting of the transaction
- Contact Information: Lender, settlement agent, and other parties
Delivery Method Matters
How you receive the Closing Disclosure affects when your three-day review period begins:
- In Person or Electronically: Review period begins the same day
- Mailed: Three additional business days are added (assumes you receive it in the mail)
- Email Consent: Must specifically consent to electronic delivery
For construction loan closings, we recommend requesting electronic delivery to maximize flexibility in your timeline.
TRID Disclosure Timeline: How the 3-7-3 Rule Works
This step-by-step timeline illustrates the flow of a typical mortgage transaction under TRID rules. Note that the earliest possible closing is typically 10 business days from application, though most loans take considerably longer due to underwriting, appraisal, and documentation requirements.
Why Does the 3-7-3 Rule Exist?
Before TRID took effect in October 2015, borrowers frequently encountered surprise fees and unfavorable terms at closing. The previous disclosure system was confusing, with multiple overlapping forms and insufficient review time.
The Consumer Financial Protection Bureau implemented TRID to:
- Simplify Disclosures: Combine four separate forms into two streamlined documents
- Standardize Timing: Establish clear deadlines for disclosure delivery
- Enable Comparison: Create consistent formats for comparing lender offers
- Protect Borrowers: Ensure adequate review time before closing
- Reduce Surprises: Limit how much closing costs can increase from estimate to final
For borrowers, the 3-7-3 rule means fewer surprises at the closing table and more time to understand exactly what you're agreeing to before signing.
Key Differences: Loan Estimate vs. Closing Disclosure
Understanding the differences between these documents helps you know what to expect at each stage of your loan process and when to raise concerns about changing terms or costs.
Tolerance Levels: What Can Change Between Estimate and Final?
The TRID rules establish tolerance levels that limit how much certain fees can increase from your Loan Estimate to your Closing Disclosure.
Zero Tolerance (Cannot Increase)
These fees cannot increase at all from Loan Estimate to Closing Disclosure:
- Fees paid to the lender
- Fees paid to a broker
- Fees paid to an affiliate of the lender or broker
- Transfer taxes
10% Tolerance (Cumulative)
These fees can increase by up to 10% in total (not 10% each):
- Recording fees
- Third-party services the lender selected (if you use that provider)
- Third-party services you cannot shop for
No Limit (Can Increase Without Restriction)
- Third-party services you shopped for from providers not on the lender's list
- Prepaid interest
- Property insurance premiums
- Homeowner's association fees
- Costs that arise from changed circumstances
If fees exceed tolerance levels, the lender must refund the excess to you at closing or within 30 days.
Changes That Restart the 3-Day Waiting Period
Not every change to your loan requires a new waiting period, but certain significant modifications trigger a fresh three-day review. For construction loan borrowers working toward a specific groundbreaking date, understanding these triggers is critical.
What Restarts the Clock
APR Changes Beyond Tolerance
- Fixed-rate loans: APR increases more than 1/8 of a percentage point
- Adjustable-rate loans: APR increases more than 1/4 of a percentage point
Loan Product Changes
- Fixed to adjustable-rate conversion (or vice versa)
- Change in loan type (conventional to government, etc.)
Prepayment Penalty Addition
- Adding a prepayment penalty not previously disclosed
What Doesn't Restart the Clock
- Minor fee adjustments within tolerance
- Changes that decrease costs or improve terms
- Correcting clerical errors
- Changes requested by the borrower
To avoid delays, review your Closing Disclosure immediately upon receipt and communicate any concerns to your loan officer promptly.
How the 3-7-3 Rule Affects Construction Loans
Construction financing adds complexity to the TRID timeline. Depending on your loan structure, you may encounter TRID requirements once or twice during your project.
Single-Close Construction Loans
With a single-close construction-to-permanent loan, you close once before construction begins. TRID applies to this initial closing:
- Loan Estimate provided within 3 days of application
- 7-day waiting period applies
- Closing Disclosure required 3 days before closing
The benefit: Once you close, there's no second closing (and no second TRID timeline) when construction completes. The loan automatically converts to permanent financing.
Two-Close Construction Loans
Some borrowers choose separate construction and permanent loans. In this structure:
Construction Loan Closing: Full TRID compliance required (3-7-3 rule applies) Permanent Loan Closing: Refinance into permanent financing (TRID applies again)
The two-close approach means navigating TRID timelines twice, but offers flexibility to shop for better permanent financing terms after construction completes.
TRID Rules for Construction Loans vs. Traditional Mortgages
Construction loans require additional planning to accommodate both TRID requirements and your build schedule. Work closely with your lender to establish realistic timelines that satisfy regulatory requirements while keeping your project moving forward.
Strategies for Managing TRID Timelines
Whether you're pursuing a construction loan or traditional mortgage, these strategies help you navigate TRID requirements efficiently.
Start Early
Begin your loan application process well before your target closing date. Allow extra buffer time for:
- Document collection and verification
- Appraisal scheduling (especially for construction with land valuations)
- Title work and survey
- Potential re-disclosures
For construction loans, we recommend starting your application 60-90 days before your desired groundbreaking date.
Maintain Communication
Keep open lines of communication with your loan officer throughout the process:
- Respond promptly to document requests
- Review disclosures immediately upon receipt
- Ask questions before the waiting period expires
- Alert your lender to any changes in your financial situation
Avoid Last-Minute Changes
Changes to loan terms near closing can trigger additional waiting periods:
- Lock your rate at the appropriate time
- Finalize property details early
- Avoid large deposits or withdrawals during underwriting
- Don't open new credit accounts
Understand Your Rights
You can waive the three-day Closing Disclosure waiting period only in a bona fide personal financial emergency:
- Property destruction (fire, flood, etc.)
- Imminent loss of property due to foreclosure
- Other genuine personal emergencies
Convenience or simple timing preferences don't qualify. The waiver must be in writing and explain the nature of the emergency.
Using the Disclosure Period Wisely
The waiting periods mandated by the 3-7-3 rule aren't just obstacles to overcome - they're opportunities to ensure you're getting the right loan for your needs.
When You Receive Your Loan Estimate
- Compare offers from multiple lenders side by side
- Review interest rates, APR, and total closing costs
- Check for unexpected fees or services
- Calculate whether paying points makes sense
- Ask questions about any terms you don't understand
Use our commercial mortgage calculator to model different scenarios and compare long-term costs.
When You Receive Your Closing Disclosure
- Compare every line item to your Loan Estimate
- Verify that rate lock terms match what you agreed to
- Check loan amount, monthly payment, and cash to close
- Review prepayment penalty provisions (if any)
- Confirm insurance and tax escrow amounts
- Verify property address and legal description
If anything looks incorrect, contact your loan officer immediately. You have three days to resolve issues before closing.
DSCR Loans and TRID Applicability
For investors considering DSCR loan programs for construction projects, it's important to understand that TRID rules apply differently to business-purpose loans.
TRID generally applies to most closed-end consumer credit transactions secured by real property. However, loans made primarily for business or commercial purposes are typically exempt. This includes:
- Investment property loans to LLCs or corporations
- Commercial construction financing
- Business-purpose loans secured by non-owner-occupied property
If your construction loan qualifies as a business-purpose loan, the 3-7-3 rule may not apply, potentially allowing for faster closing timelines. Discuss your situation with our team to determine which regulations apply to your specific transaction.
Working with Clear House Lending on Your Construction Loan
At Clear House Lending, we understand that construction projects operate on tight schedules. Weather windows, contractor availability, and material delivery all create pressure to close on time. Our team works proactively to manage TRID requirements without derailing your project timeline.
Our construction loan process includes:
- Early Application Review: We identify potential issues before they cause delays
- Proactive Communication: Regular updates keep you informed of progress
- Experienced Processing: Our team knows how to avoid common TRID pitfalls
- Flexible Solutions: When delays occur, we help you adjust your construction schedule
Whether you're building a single-family home, developing a multifamily project, or constructing commercial property, we structure financing that aligns with both regulatory requirements and your business objectives.
Frequently Asked Questions About the 3-7-3 Rule
Can I close faster than 10 business days after applying? In most cases, no. The 7-day waiting period after Loan Estimate delivery and the 3-day Closing Disclosure review period establish minimum timeframes. The only exception is a bona fide personal financial emergency with a written waiver.
Do business days include weekends? For the 7-day waiting period, Saturdays count as business days. For the 3-day Closing Disclosure period, Saturdays also count. Only Sundays and federal holidays are excluded.
What happens if my Closing Disclosure has errors? If you identify errors, notify your lender immediately. Corrected disclosures may be required, and some corrections restart the 3-day waiting period.
Does TRID apply to refinances? Yes, TRID applies to most refinance transactions secured by your principal residence. The same 3-7-3 rule governs the disclosure timeline.
Can my closing date change after I receive the Closing Disclosure? Yes, but any changes that trigger a new 3-day waiting period will push back your closing date. Minor corrections typically don't require new disclosures.
Ready to Start Your Construction Loan Application?
The 3-7-3 rule exists to protect you as a borrower, ensuring you have adequate time to review and understand your loan terms before committing. While these waiting periods can feel like obstacles when you're eager to start construction, they provide valuable protection against surprise fees and unfavorable terms.
At Clear House Lending, we help borrowers navigate TRID requirements while keeping construction projects on schedule. Our experienced team understands how to structure timelines that satisfy regulatory requirements without unnecessary delays.
Contact our team to discuss your construction financing needs, or apply for your construction loan to start the process. We'll guide you through each step of the disclosure timeline, ensuring you understand your loan terms and close on time.
Planning a construction project? Use our commercial mortgage calculator to estimate your financing costs, then speak with our construction loan specialists to discuss your project timeline and TRID requirements.