What is a Truth-In-Lending Disclosure?
The Disclosure is designed to give you information about the costs of your loan so you can compare these costs with those of other loan programs or lenders.
What is the ‘Annual Percentage Rate?” (Box 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.
What is the “Finance Charge?” (Box B)
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 charged over the life of the loan.
What is the ‘Amount Financed?” (Box C)
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 $250,000 and the Prepaid Finance Charges total $5,000, the Amount Financed would be $245,000.
What is the “Total of Payments?” (Box D)
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 principle, interest and mortgage insurance premiums, but does not include payments for real estate taxes or property insurance premiums.