"TRUTH-IN-LENDING" STATEMENT
Federal law provides that buyer clients receive a
"Truth-in-Lending Disclosure Statement." Study it carefully as
well as other information about your loan that is given to you.
Your loan is an important transaction. Following are some of the
most frequently asked questions about the Truth-in-Lending
Statement and their answers.
Q. What is a Truth-in-Lending disclosure Statement and Why Do
I Receive It?
A. Your Disclosure Statement provides information which Federal
law requires us to give you. The purpose of the statement is to
give you information about your loan and help you shop for
credit.
Q. What is the ANNUAL PERCENTAGE RATE?
A. The Annual Percentage Rate, or A.P.R., is the cost of your
credit expressed in terms of an annual rate. Because you may be
paying "points" and other closing costs, the A.P.R. disclosed is
often higher than the interest rate on your loan. The A.P.R. can
be compared to other loans for which you may have applied and
give you a fair method of comparing price.
Q. What is the AMOUNT FINANCED?
A. The amount financed is the mortgage amount applied for MINUS
prepaid finance charges and any required deposit balance.
Prepaid finance charges include items such as loan origination
fees, commitment or placement fee (points), adjusted interest,
and initial mortgage insurance premium. The Amount Financed
represents a NET figure used to allow you to accurately assess
the amount of credit actually provided.
Q. Does this mean I will get a lower mortgage than I applied
for?
A. No, if your loan is approved for the amount you applied for,
that's how much will be credited toward your home purchase or
refinance at settlement.
Q. Why is the ANNUAL PERCENTAGE RATE different from the
interest rate for which I applied? Why is the AMOUNT FINANCED
different?
A. The Amount Financed is lower than the amount you applied for
because it represents a NET figure. If someone applied for a
mortgage of $50,000 and their prepaid finance charges total
$2,000, the amount financed would be shown as $48,000, or
$50,000 minus $2,000.
The A.P.R. is computed from this LOWER figure, based on what
your proposed payments would be. In a $50,000 loan with $2,000
in prepaid finance charges, and an interest rate of 14%, the
payments would be $592.44 (principal and interest) on a loan
with a thirty year loan term. Since the A.P.R. is based on the
NET amount financed, rather than on the actual mortgage amount,
and since the payment amount remains the same, the A.P.R. is
higher than the interest rate. It would be 14.62%. If this
applicant's loan were approved he would still receive a $50,000
loan for thirty years with monthly payments @ 14% or $592.44.
Q. How will my payments be affected by the Disclosure
Statement?
A. The Disclosure Statement only discloses your estimated
payments. The interest rate determines what your monthly
principal and interest payment will be.
Q. What is the FINANCE CHARGE?
A. The Finance Charge is the cost of credit. 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 mortgage insurance charged over the life of the loan. This
figure is ESTIMATED on the disclosure statement given with your
application.
Q. What is the TOTAL OF PAYMENTS?
A. This figure indicates the total amount you will have paid,
including principal, interest, prepaid finance charges, and
mortgage insurance if you make the minimum required payments for
the entire term of the loan. This figure is ESTIMATED on the
Disclosure Statement and is estimated in any adjustable rate
transaction.
Q. My statement 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 not refundable. Neither is any interest
which has already been paid. If you pay the loan off early, you
should not have to pay the full amount of the "finance charges"
shown on the disclosure. This charge represents an estimate of
the full amount the loan would cost you if the minimum required
payments were made each month through the life of the loan.
Q. Why must I sign the Disclosure Statement?
A. Lenders are required by law to provide the information on
this statement to you in a timely manner. Your signature merely
indicates that you have received this information, and does not
obligate either you or the Lender in any way.
Some final notes from a
Buyers Agent perspective...
As your Buyers Agent, I remind you to take notes on all facets
to the process. I know its a lot of work, but there is a lot of
information you are receiving and it is extremely hard to
remember everything you are told.
Ask alot of questions when you dont understand. You have a right
to know the answers. If the lender you are working with shows
frustration with your questions, I suggest finding another
lender. Because the body language you may be picking up is
clearly indicating they do not have your best interest at heart.
A loan officer loyal to their clients will do all they can to
lead you down the path so the outcome is all favorable and the
path leading to it is well understood.
As your Buyers Agent, I demand it your complete satisfaction. I
care about your well being and you deserve the very best
treatment possible.
Oh,something else very very important: Your interest rate
quoote is merely the rate on the day it was quoted. It is the
Borrowers responsibility to LOCK THE RATE to be
guaranteed the rate. Ask your loan officer about this process.
It is crucial you understand this. |
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