Answers To The Most Frequently
Asked Truth-In-Lending

1. Annual Percentage Rate- The Cost of your credit at a yearly rate.

2. Finance Charge- The dollar amount the credit will cost you.

3. Amount Financed- The amount of credit provided to you or on your behalf.

4. Total of Payments- The amount you will have paid after you have made all payments as scheduled.

Q. What is a Truth-In-Lending Disclosure and why do I receive it?
A. The Disclosure is designed to give you information about the costs of your loan so that you compare these costs with those of other loan programs or lenders.

Q. What is the ANNUAL PERCENTAGE RATE?  (See number 1 above)
A. 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 which I Applied?
A. The A.P.R. is computed from the Amount Financed and based on what your proposed payments will be on the actual loan amount credit 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.

Q.What is the FINANCE CHARGE?   (See number 2 above)
A. The amount 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? (See number 3 above)
A. 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 origination, commitment or discount fees ("points"), adjusted interest, and initial mortgage insurance premium. The Amount Finance is lower than the amount you applied for because it represent a NET figure. If you applied for $50,000 and 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?
A. No. If your loan is approved in the amount requested, you will receive credit toward your 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 PAYMENTS? (See number 4 above)
A. 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.

Q. My Discloser says that if I pay the off early, I will not be entitled to a refund of part of the finance charges. What does this mean?
A. This means that you will be charge 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.