TRUTH - IN - LENDING:

Answers To The Most Frequently Asked Questions



What is a Truth-In-Lending Disclosure and why are lenders required to provide it? The disclosure is designed to give you information about the costs of your loan so that you may compare these costs with those of other loan programs or lenders.

What is the Annual Percentage Rate in Box A? The Annual Percentage Rate (A.P.R.) is the cost of your credit expressed as an annual rate. Because you may be paying loan discount points, mortgage insurance, and other prepaid finance charges at closing, the A.P.R. disclosed is often higher than the interest rate on your loan. This A.P.R. can be compared to the A.P.R. on other loan programs to give you a consistent means of comparing rates and programs.

What is the Finance Charge in Box B? The Finance Charge is the cost of credit expressed in dollars. It is the total amount of Interest calculated at the interest rate over the life of the loan, plus Prepaid Finance Charges and the total amount of any required mortgage insurance premiums charged over the life of the loan.

What is the Amount Financed in Box C? The Amount Financed is the loan amount applied for, minus the Prepaid Finance Charges. Prepaid Finance Charges include items paid at or before settlement, such as loan origination, commitment or points, adjusted interest, and initial mortgage insurance premiums. The Amount Financed is lower than the amount you applied for because it represents a NET figure. If you applied for $50,000 and the Prepaid Finance Charges total $2,000, the Amount Financed would be $48,000.

Does this mean I will get a smaller loan than I applied for? No. If your loan is approved in the amount requested, you will receive credit toward your home purchase or refinance for the full amount for which you applied. In the example above, you would receive a $50,000, not a $48,000, loan.

What is the Total of Payments in Box D? This figure represents the total amount you will have paid if you make the minimum required payments for the entire term of the loan. This includes principal, interest and mortgage insurance premiums, but does not include payments for real estate taxes or property insurance premiums.

My Disclosure says that if I pay the loan off early, I will not be entitled to a refund of part of the Finance Charge. What does this mean? This means that you will be charged interest for the period of time in which you used the money loaned to you. Your prepaid finance charges are not refundable, nor are any prepaid interest charges.

Key Words: Truth-In-Lending, TIL, Annual Percentage Rate, APR, A.P.R., Finance Charges, Amount Financed, Net Loan, Net Loan Amount, Total Payments, Principal and Interest, PI, Loan Discount Points, Mortgage Insurance, Prepaid Finance Charges, Loan Origination, Commitment Fee, Discount Points, Mortgage Insurance Premiums, PMI, Principal, Interest, Real Estate Taxes, Property Insurance Premiums, Homeowners Insurance, Hazard Insurance