Understanding APR

Mortgage lenders are required by Federal Regulation Z to provide borrowers with a Truth-in Lending "Disclosure Statement of Loan". This itemizes your Annual Percentage Rate, Finance Charge, Amount Financed, and Total of Payments. These figures are based on the terms of the loan for which you have applied. If the exact terms, interest rate or sales price have not been determined at the time of your loan application, the Truth-in Lending will be estimated using figures based on the best information at that time. You will receive a final disclosure based on actual terms when they become available.

The Annual Percentage Rate (APR) is the cost of credit expressed as a yearly rate. It is not the same as your Note interest rate. The APR is generally higher than the Note rate because it includes any discount points, mortgage insurance, VA funding fee, and any other costs of financing. The Finance Charge is the cost of credit as a dollar amount; i.e., the total amount of interest to be paid over the term of the loan, plus all other loan charges to be paid by you. The Amount Financed is the loan amount minus the Finance Charges paid at closing. These are known as prepaid finance charges. The Amount Financed should not be confused with the loan amount. The Total of Payments is the sum of the Finance Charge plus the Amount Financed that would be made if the loan is carried for the fulI term.

If you have any questions concerning the Truth-in Lending statement, contact your loan officer.