Truth In Lending(TIL)
FAQ
Annual Percentage Rate
The cost of your credit at a yearly rate.
Finance Charge
The dollar amount the credit will cost you.
A B
What is a Truth-In-Lending Disclosure (TIL) and why do I receive it?
This is a Disclosure is designed to give you information about the costs of your loan so that you may compare these costs with those of other loan programs or lenders. It is usually prepared in combination with the Good Faith Estimate. The Federal government requires the TIL to be provided to the borrower within 3 business days of loan application..
(Box "A" above)What is the ANNUAL PERCENTAGE RATE?
The Annual Percentage Rate (APR) is the cost of your credit expressed as an annual rate. Because you may be paying loan discount "points" and other "prepaid" finance charges (PFC) at closing, the APR disclosed is often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give you a consistent means of comparing  rates and programs.
Note: Be careful when comparing different lenders using the APR. Some lenders do not include all items as prepaid finance charges that should be, which can result in a lower APR than it actually is.
Why is the ANNUAL PERCENTAGE RATE different from the interest rate for which I applied?
The APR is computed from the Amount Financed" and based on what your proposed payments will be on the actual loan amount credited to you at settlement. In a $50,000 loan with $2,000 Prepaid Finance Charges (PFC), a 30 year term and a fixed interest rate of 12%, the payments would be $514.31 (principal & interest). Since the APR is based on the "Amount Financed" ($48,000), while the payment is based on the actual loan amount given ($50,000), the APR (12.553%) is higher than the interest rate.
(Box "B" above)What is the FINANCE CHARGE?
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" (PFC) and the total amount of any required mortgage insurance charged over the life of the loan.
(Box "C" above)What is the AMOUNT FINANCED?
The "Amount Financed" is the loan amount applied for, minus the "Prepaid Finance Charges". "Prepaid Finance Charges" (PFC) 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 a $50,000 and the "Prepaid Finance Charges"  total $2,000, the "Amount Financed" would be $48,000.
Note: "Prepaid Finance Charges" are marked on the Good Faith Estimate with a "PFC" to the right of the amount.
Does this mean I will get a smaller loan than I applied for?
No. If your loan is approved in the amount requested, you will receive credit toward your home purchase or refinance for the full amount for which you applied in the example above, you would therefore received a $50,000, not a $48,000, loan.
(Box "D" above)What is the TOTAL OF PAYMENTS?
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 principal, interest and mortgage insurance premiums, but does not include payments for real estate taxes or property insurance premiums.
My Disclosure says that if I pay the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean?
This means that you will be charged interest for the period of time in which you used the money loaned to you. Your prepaid finance charges are generally not refundable, nor is any interest which has already been paid. Usually, this will only be checked "Yes" if you are applying for an FHA loan since FHA loans require an Upfront Mortgage Insurance Premium that may be partially refundable if you refinance your loan within a certain number of years.
What is the Filing Fee?
The Filing Fee is an estimate of the cost of recording the legal documents (mortgage, deed of trust, deed, etc.) connected with your transaction. The fee will be charged at settlement.

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