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Q:
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What
is Truth-in Lending Disclosure and why do I receive it? |
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A:
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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.
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Q:
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What
is the Annual Percentage Rate? |
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A:
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The
Annual Percentage Rate (APR) 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 APR disclosed
is often higher than the interest rate on your loan. This APR can
be compared to the APR on other loan programs to give you a consistent
means of comparing rates and programs.
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Q:
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Why
is the Annual Percentage Rate different from the interest rate for
which I applied? |
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A:
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The
APR is computed from the Amount Financed and based on what your
proposed payments will be on the actual loan amount credited to
you at settlement. In a $50,000 loan with $2,000 Prepaid Finance
Charges, a 30 year term, and a fixed interest rate of 12%, the payments
would be $514.31 (principal and interest). Since the APR is based
on the Amount Financed ($48,000), while the payment is based on
the actual loan amount given ($50,000), the APR (12.553%) is higher
than the interest rate.
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Q:
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What
is the Finance Charge? |
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A:
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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 charged over the life
of the loan.
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Q:
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What
is the Amount Financed? |
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A:
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The
Amount Financed is the amount of credit provided to you or on your
behalf, minus the Prepaid Finance Charges. Prepaid Finance Charges
include items paid at or before closing, 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.
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Q:
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Does
this mean I will get a smaller loan than I applied for? |
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A:
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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 loan, not a $48,000 loan.
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Q:
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What
is the TOTAL OF PAYMENTS? |
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A:
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This
figure represents the total you will have paid if you make the minimum
required payments for the entire term of the loan. This included
principal, interest, and mortgage insurance premiums, but does not
include payments for real estate taxes or property insurance premiums.
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Q:
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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 that
mean? |
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A:
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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 not refundable, nor is any interest that has already
been paid.
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Q:
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What
is the Filing Fee? |
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A:
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The
Filing Fee is an estimate of the cost of recording the legal documents
(mortgage, deed of trust, deed, etc.) connected with your transaction.
The fee will be charged at closing.
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