Truth In Lending Disclosure


What Is the Truth In Lending Disclosure?

What is the Truth in Lending Disclosure?
Gustan Cho Associates

Mortgage disclosures is required to be disclosed to all mortgage loan applicants by federal law.  The Truth in Lending Disclosure is one of the most important mortgage disclosures that needs to be disclosed to all mortgage loan applicants in a timely manner.

On May 29th, 1968, the United States Congress has enacted the Truth in Lending Act, also known as TILA.  The Truth in Lending Act, again known as TILA, is the federal law which created the Truth in Lending Disclosure, or also known as TIL mortgage disclosure, a mandatory requirement for mortgage lenders to disclose to all mortgage applicants applying for a residential mortgage loan.  It discloses to the borrowers all conditions and terms of the mortgage loan they are applying for.  The main reason why the Truth in Lending disclosure was created to so that mortgage loan borrowers and public consumers for credit can make informed choices when applying for a mortgage loan or consumer loan.  The Truth in Lending Disclosure provides various forms of disclosures but there are five important items that needs to be absolutely disclosed to the loan applicant.

Things That Need To Be Disclosed On The Truth In Lending Disclosure

The finance charges of the loan needs to be provided and disclosed in every Truth in Lending Disclosure.  The finance charges are the fees and cost of the mortgage loan over the term of the mortgage loan.  The fees and costs of the mortgage loan will include interest, interest rate, closing costs, third party fees and costs such as title charges, credit check fees, points, appraisal fees and all other third party costs even though the mortgage lender has nothing to do with it or associated with it.  The mortgage lender still needs to disclose all possible and potential fees and costs the borrower may or may encounter.  The Truth in Lending Disclosure cannot be underdisclosed or else the mortgage company will be liable for any fees and costs the borrower pays if the fees and costs is underdisclosed and if they go over 10% of the disclosed amount even though they are third party charges.  These costs and fees are the charges that is associated with the extension of getting credit so the mortgage loan borrower is knowledgeable and understands the terms of the loan prior to accepting the terms of the mortgage loan.

Annual Percentage Rate: APR

The annual percentage rate, also known as the APR, needs to be disclosed on the Truth in Lending Disclosure.  The annual percentage rate, APR, is calculated by inputing all finance charges, interest paid by the borrower before and during the mortgage loan, fees and costs associated with the mortgage loan such as mortgage insurance costs, points paid by the mortgage loan borrower in order to get the mortgage loan, mortgage loan origination fees and costs, and other fees and costs with the origination and closing the mortgage loan.  The APR is not your actual interest rate but another form of rate that converts the costs and fees of originating the loan in the form of a interest rate.  APR’s is not accurate and can easily be manipulated and adjusted and many mortgage industry experts think that it is a complete waste of time but politicians think it will help the mortgage loan applicant.

Amount Financed

The mortgage amount financed needs to be included in the Truth in Lending Disclosure.  The amount financed is separate and different than the mortgage loan balance.  The mortgage loan balance will include all of the finance charges and all other fees that was on top of the original mortgage loan such as the upfront mortgage insurance premium.  The amount financed on a mortgage loan is the actual dollar amount the mortgage loan borrower wanted to borrow: The bottom line is the total original amount financed in addition to the Annual Percentage Rate, costs, and fees is the total amount of the mortgage loan.

Schedule Of Payments

Part of the Truth in Lending Act is that the mortgage loan borrower needs to be shown and the mortgage lender need to disclose the amount of schedule of payments.  On the schedule of payments, the payment due date needs to be disclosed as well as the breakdown of what the monthly payment includes such as late fees, missed payments during the term of the mortgage loan, and other fees and costs.  The mortgage loan borrowers needs to know in writing through the mortgage disclosure what each of the monthly mortgage payments will be, the breakdown of that monthly mortgage payments, and how much the mortgage payment will be each time for the duration of the mortgage loan.

Total Of Payments

The total of payments is another mortgage disclosure that needs to be disclosed to all mortgage loan borrowers.  The total of payments will be calculated at the end of the mortgage loan term and a specific dollar amount needs to be disclosed as of how much the mortgage loan borrower has paid at the end of the mortgage loan term when the mortgage loan has been paid off.

Importance Of Truth In Lending Disclosure

The Truth in Lending Disclosure is an extremely important mortgage disclosure.  If a mortgage lender does not properly disclose the Truth in Lending Disclosure, the mortgage loan borrower not only has the right to cancel their mortgage loan up to three days after a mortgage loan approval, but if not properly disclosed, the mortgage loan borrower has up to three years to cancel a mortgage loan after the mortgage loan funds at closing.

Related> Sample current disclosure forms

Related> What is the truth in lending act?

Related> Understanding mortgage disclosures

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