Truth In Lending Disclosure
The following are definitions of the terms on the Truth-In-Lending Disclosure. We will provide one to you based on your initial application after you formally apply for your mortgage. Enclosed is a sample Truth-In-Lending Disclosure for your review.
Annual Percentage Rate - This is not the "Note Rate" for which you applied. The Annual Percentage Rate (APR) is the cost of the loan in percentage terms, taking into account various loan charges, of which interest is only one such charge. Other charges which are used in calculating the APR are private mortgage insurance, or an FHA Mortgage Insurance Premium, and Prepaid Costs (discount points, origination fees, prepaid interest, underwriting fees, etc.). The APR is calculated by spreading these charges over the life of the loan which results in a rate higher than the interest rate shown on the "Note" that you will sign at your closing.
- Prepaid Finance Charges - These are certain charges made in connection with your mortgage that must be paid at the closing of your mortgage. Non-inclusive examples of such charges, as shown on your Good Faith Estimate, are origination fees, discount points, private mortgage insurance or FHA mortgage insurance, tax service fee, underwriting fee, etc. Some fees that are specifically excluded from this are appraisal and credit report fees.
- Finance Charge - This is the amount of interest, prepaid finance charge and certain insurance premiums, if any, that you will pay over the life of the loan if you were to make your regular monthly payment for the full term of your loan.