What is a Truth In Lending Disclosure and why do I receive 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 (APR)?
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” 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?
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 calculated at the
interest rate over the life of the loan, plus Prepaid Finance Charges
and the total amount of any required mortgage insurance charged over the
life of the loan.
What is the Amount Financed?
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 discount fees
(“points”), adjusted interest, and initial mortgage insurance premium.
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 in the previous question, you would
receive a $50,000 loan—not a $48,000 loan.
What is the Total Of Payments?
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 properly 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 generally
non-refundable nor is any interest which has already been paid.
