| ANNUAL PERCENTAGE RATE - The cost of your credit at a yearly rate. |
FINANCE CHARGE - The dollar amount the credit will cost you. |
Amount Financed - The amount of credit provided to you or on your behalf. |
Total of Payments - 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?
A. 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? (Box A
above)
A. 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 an consistent means of comparing
rates and programs.
Q. Why is the ANNUAL PERCENTAGE RATE different from the interest rate
for which I applied?
A. 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 amount given
($50,000), the APR (12.553%) is higher than the interest rate.
Q. What is the FINANCE CHARGE? (Box B above)
A. 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 charges over the life of the loan.
Q. What is the Amount Financed? (Box C 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 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 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 you 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 Payments? (Box D 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 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?
A.
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.