Q. What is a Truth-in-Lending Disclosure statement and why do I receive it?
A. The disclosure statement provides information Federal law requires us to give applicants. The purpose of the statement is to give applicants information about their loan and help them determine the true cost of credit.

Q. What is the ANNUAL PERCENTAGE RATE?
A. The Annual Percentage Rate or A.P.R., is the cost of credit expressed in terms of an annual rate. Because the customer is paying "points" and other closing costs, the A.P.R. is often higher than the interest rate on their loan. Typically 1 point may raise the A.P.R. about 1/8%.

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 fee, discount points, prepaid 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 an applicant will get a lower mortgage than they applied for?
A. No. If the loan is approved for this amount they applied for that's how much will be credited towards their home purchase or refinance at settlement.

Q. Why is the ANNUAL PERCENTAGE RATE different from the rate the applicant applied for? Why is the AMOUNT FINANCED different?
A. The AMOUNT FINANCED is different because it represents a net figure. If someone applied for a mortgage of $100,000 and their prepaid finance charges total $3,000, the amount financed would be shown as $97,000, or $100,000 minus $3,000.
The A.P.R. is computed from this lower figure. Based on what your proposed payments would be for a $100,000 loan with an interest rate of 9.5% the payments would be $840.85 (principal and interest) on a loan with a thirty year term. Since the A.P.R. is based on the net amount financed ($97,000), rather than the actual mortgage amount, the A.P.R. is higher than the interest rate. It would be 9.855%. If the applicants loan were approved he would still receive a $100,000 loan for thirty years with monthly of $840.85 at 9.5%.

Q. How will applicant's payments be affected by this disclosure statement?
A. The disclosure statement only discloses their estimated payments. Their interest rate determines what their 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 with the disclosure given to the customer after the application is taken.

Q. What is the TOTAL OF PAYMENTS?
A. This figure represents what the applicant will have paid, including principal, interest, prepaid finance charges, and mortgage insurance if they make minimum required payments for the life of the loan. This figure is estimated on the Disclosure statement and is estimated on any adjustable rate transaction.

Q. The statement says that if the loan is paid off early, the borrower will not be entitled to a refund of the finance charge. What does this mean?
A. This means that they will be charged interest for the period of time in which they used the money loaned to them. Your prepaid finance charges are not refundable. Neither is any interest that has been paid. If the applicant pays the loan off early they will generally not have to pay the full amount of "finance charges" on the disclosure. This charge represents the full amount the loan would cost them if the minimum required payments were made each month through the life of the loan.

Q. Why must applicants sign the initial Disclosure Statement?
A. The lender is required by law to provide the information on this statement to them in a timely manner. Their signature merely means they have received this information, but it does not obligate the applicant to use the lender or lock in an interest rate/loan program.