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What is a Truth-in-Lending disclosure Statement and why does the borrower receive it? |
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What is the ANNUAL PERCENTAGE RATE? |
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What is the AMOUNT FINANCED? |
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Does this mean I will get a lower mortgage than they applied for? |
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Why is the ANNUAL PERCENTAGE RATE different from the interest rate that I applied for and locked? |
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How will the Disclosure Statement affect my payments? |
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What is the FINANCE CHARGE? |
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What is the TOTAL OF PAYMENTS? |
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My statement says that if I pays the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean? |
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Why must I sign the Disclosure Statement? |
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What is a Truth-in-Lending disclosure Statement and why does the borrower receive it? |
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The Disclosure Statement provides information which Federal law
requires us to give the borrower. The purpose of the statement
is to give the borrower information about their loan and help
them to shop for credit.
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What is the ANNUAL PERCENTAGE RATE? |
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The Annual Percentage Rate, or APR, is the cost of the borrower's
credit expressed in terms of an annual rate. Because the borrower
may be paying "points" and other closing costs, the APR disclosed
is often higher than the interest rate on the loan. The APR can be
compared to other loans for which the borrower may have applied
and give them a fair method of comparing price.
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What is the AMOUNT FINANCED? |
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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 the borrower to accurately assess the amount of
credit actually provided.
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Does this mean I will get a lower mortgage than they applied for? |
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No,
if the borrower's loan is approved for the amount they applied
for, that's how much will be credited toward their home purchase
or refinance at settlement.
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Why is the ANNUAL PERCENTAGE RATE different from the interest rate that I applied for and locked? |
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The Amount Financed is lower than the amount the borrower 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 APR is computed from this LOWER figure, based on what
the borrower's 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 APR is based
on the NET amount financed, rather than on the actual mortgage
amount, and since the payment amount remains the same, the APR
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.
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How will the Disclosure Statement affect my payments? |
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The Disclosure Statement only discloses the borrower's estimated
payments. The interest rate determines what the monthly principal
and interest payment will be.
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What is the FINANCE CHARGE? |
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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 the borrower's application.
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What is the TOTAL OF PAYMENTS? |
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This figure indicates the total amount the borrower will have
paid, including principal, interest, prepaid finance charges,
and mortgage insurance if he or she 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.
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My statement says that if I pays the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean? |
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This means that the borrower will be charged interest for the
period of time in which he used the money loaned to him. His
PREPAID finance charges are not refundable. Neither is any
interest, which has already been paid. If he pays the loan off
early, he 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 him if the
minimum required payments were made each month through the
life of the loan.
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Why must I sign the Disclosure Statement? |
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Lenders are required by law to provide the information on this
statement to the borrower in a timely manner. The borrower's
signature merely indicates that he has received this
information, and does not obligate the borrower, you or the
Shearsons Mortgage in any way.
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