Truth in Lending Statement
Your mortgage lender is required by federal law to give you a Truth in Lending Statement (TIL) before you’re legally bound to begin making mortgage payments. Often, you’ll receive this statement as part of the other documents you’ll review and sign at loan closing.
What’s inside the Truth in Lending Statement?
It includes key disclosures about the cost of your mortgage, so you’ll want to review your statement carefully. These disclosures include:
· Annual Percentage Rate (APR): This is the total cost of your loan (including mortgage interest PLUS other costs to obtain your mortgage) and is expressed as a yearly rate. Keep in mind that your APR is different than your mortgage interest rate.
· Finance Charge: Your total cost to borrow your mortgage amount, if you make all payments as scheduled throughout the loan term.
· Amount Financed: The amount of credit that you are receiving.
· Total Of Payments: If you make all payments as scheduled, this is the total amount you’ll pay.
· Principal, Interest, Taxes and Insurance (PITI): These are the four components of a typical monthly payment and include your mortgage principal and interest payment, property taxes and premiums for homeowner’s insurance and mortgage insurance (if applicable).
· Total Estimated Monthly Payment: The sum of your principal, interest, taxes and insurance.
The Truth in Lending Statement also includes:
· Whether or not your mortgage requires a balloon payment (a payment at the end of the loan term that is larger than your regular, monthly payments).
· Whether or not your mortgage has a demand feature, meaning the lender can “demand” that the mortgage be paid in full before the original loan term is complete.
· Whether or not someone who buys the property from you can assume the remainder of your mortgage based on its original terms.
Make sure you sit down with your Loan Officer to go over the TIL Statement. The better you understand it, the less likely you will be surprised by anything that comes up during the life of your loan.