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Truth-In-Lending Disclosure FAQ's
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?
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 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
above, you would receive a $50,000, 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
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 generally not refundable, nor is any
interest which has already been paid. |
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