The lender will be
providing you with a “Truth in Lending” form at a
later date. This form will explain how your
refinance charges are calculated. Below is an
reference for the most commonly asked questions
pertaining to the “Truth in Lending” settlement.
| Annual
percentage rate |
Finance charge |
Amount financed |
Total of
payments |
| The cost of your
credit at a yearly rate. |
The dollar
amount the credit will cost you. |
The amount of
credit provided to you or on your behalf. |
The amount you
will have paid after you have made all payments
as scheduled. |
| A % |
B % |
C % |
D % |
Q. What is a Truth-in-Lending Disclosure and why
do I receive it?
Answer: 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.
Q. What is the Annual Percentage Rate?
| Annual
percentage rate |
| The cost of your
credit at a yearly rate. |
| A % |
Answer: 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.
Q. Why is the Annual Percentage Rate different
from the interest rate for which I applied?
Answer: The A.P.R. is computed from
the Amount Financed and is 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 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.
Q. What is the finance charge?
| Finance charge |
The dollar
amount the credit will cost you.
B % |
Answer: 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.
Q. What is the Amount Financed?
| Amount financed |
The amount of
credit provided to you or on your behalf.
C % |
Answer: The amount Financed is the
loan amount applied for, minus the 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
$50,000and the prepaid finance charges total 2,000,
the amount financed would be $48,000.
Q. Does this mean I will get a smaller loan than
I applied for?
Answer: 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 therefore receive a $50,000, not a $48,000
loan.
Q. What is the Total of Payment?
| Total of
payments |
The amount you
will have paid after you have made all payments
as scheduled.
D % |
Answer: 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.
This figure is estimated on the disclosure statement
and is estimated in any adjustable rate transaction.
Q. 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?
Answer: 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. If you pay the
loan off early, you should have to pay the full
amount of the “finance charges” shown on the
disclosure.
Q. What is the Filing Fee?
Answer: 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
settlement; please do not send it now.
