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ANSWERS TO
THE MOST FREQUENTLY ASKED
TRUTH-IN-LENDING QUESTIONS
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ANNUAL PERCENTAGE RATE
The cost of your credit at a yearly rate.
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FINANCE CHARGE
The dollar amount the credit will cost you.
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Amount Financed
The amount of credit provided to you or on
your behalf.
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Total of Payments
The amount you will have paid after you
have made all payments as scheduled.
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| A
%
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$
B
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$ C
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$
D
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What is 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? (Box "A" Above)
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.
Why is the ANNUAL PERCENTAGE RATE different from the interest rate
for
which I applied?
The A.P.R. 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 payment would be $514.31
(principal and interest). Since the A.P.R. is based on the Amount Financed
($48,000), while the payment is based on the actual loan amount given
($50,000), the A.P.R. (12.553%) is higher than the interest rate.
What is the FINANCE CHARGE? (Box "B" Above)
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? (Box "C" Above)
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 towards 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? (Box "D" Above)
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 of 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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