Truth in Lending Disclosure

A truth in lending disclosure statement is a document that federal law requires lenders to provide to all loan applicants within three business days of receiving a loan application, disclosing all costs associated with making and closing the loan. These costs include the annual percentage rate, finance charges, amount financed, and the total payments you will make over the term of the loan.

The Truth in Lending Disclosure contains five primary boxes:

• Annual Percentage Rate: This is the cost of your credit expressed as an annual rate. It includes not only your contractual interest rate, but also any prepaid finance charges paid during or before the loan’s closing – such as origination points, service fees or credit fees, commitment or discount fees, buyer’s points, etc. – as well as any private mortgage insurance (PMI).   
• Finance Charge: The dollar amount the credit will cost you including the total amount of interest incurred over the loan’s lifetime, plus any prepaid finance charges and mortgage insurance premiums (if required).  
• Amount Financed: Basically, this is the amount of money being loaned to you. 
  • The amount financed represents:
    • the principal loan amount
    • any amounts financed by the lender that are not part of the finance charge 
• Total of Payments: This figure indicates the total amount you will pay over the course of the loan if you make all required payments. This includes the principal,   interest and private mortgage insurance (if required).   
• Payment Schedule: This includes the number of payments, amount of payments, and when the payments are due. Keep in mind that the amount of payments does not include payments for real estate taxes or property insurance premiums. However, if you have mortgage insurance, the payments may reflect that as well.