Truth-In-Lending Disclosure

The Truth-In-Lending Act, also know as Regulation Z, requires lenders to provide meaningful disclosures concerning the cost and certain other terms of the borrower's mortgage loan transaction. These disclosures enable the borrower to compare the various credit terms that may be available from different sources.

Truth-in-Lending requires lenders to disclose the Annual Percentage Rate (APR). APR is a measure of the cost of credit expressed as a yearly percentage rate. Factored into this calculation are certain prepaid finance charges which are paid at loan closing. Examples of prepaid finance charges include:

• Borrower paid discount points
• Mortgage insurance premiums
• Lender's settlement fees

Examples of charges that are not included in APR include:

• Credit report fees
• Title insurance charges
• Property survey

It is important to note that the actual note interest rate appears on Page Two of the Truth-In-Lending Disclosure which is not to be confused with the Annual Percentage Rate. Equally important is the fact the amount financed is typically less than the principal amount of the mortgage. The reason for this is the "Amount Financed" is determined by subtracting the sum of all prepaid finance charges from the original principal amount of the mortgage loan. Finally, in most mortgage transactions, the required use of the "Amount Financed" will result in the APR being greater than the loan's contractual interest rate.

In many cases, the Truth-In-Lending Disclosure can be very confusing. For more information, please contact Inman Mortgage Group today, as we look forward to providing you with "The Personal and Professional Service You Deserve!"