Frequently Asked Questions – FAQ’s

What is a NEW LOAN ESTIMATE? (LE)

The New Loan Estimate (LE) replaces the Good Faith Estimate (GFE) and the initial Truth In Lending document (TIL). The LE provides borrowers with clearer information on loan terms and estimates of loan and closing costs. This will facilitate comparison shopping. It will be provided to all borrowers within 3 business days, after they have submitted their loan applications.

What is ANNUAL PERCENTAGE RATE? (APR)

The Annual Percentage Rate, or A.P.R., is the cost of your credit expressed in terms of an annual rate. Because you may be paying “points” and other closing costs, the A.P.R. can be compared to other loans you may have applied for and give you a fair method of comparing prices.

What is the AMOUNT FINANCED?

The amount financed is the mortgage amount applied for MINUS prepaid finance charges and any required deposit balance. Prepaid finance charges include loan origination fees, commitment or replacement fees (points), adjusted interest, and initial mortgage insurance premiums. The Amount Financed represents a NET figure that allows you to assess the amount of credit provided accurately.

Does this mean I will get a lower mortgage than what I applied for?

No, if your loan is approved for the amount you applied for, that is how much will be credited toward your home purchase or refinance at settlement.

What is the difference between APR and interest rate? Why is amount financed different?

The Amount Financed is lower than the amount you applied for because it represents a NET figure. If someone applied for a mortgage of $50,000 and their prepaid finance charges total $2,000, the amount financed would be shown as $48,000, or $50,000 minus $2,000. The A.P.R. is computed from this LOWER figure, based on what your proposed payments would be. In a $50,000 loan with $2,000 in prepaid finance charges, and an interest rate of 14%, the payments would be $592.44 (principal and interest) on a loan with a thirty year loan term. Since the A.P.R. is based on the NET amount financed, rather than on the actual mortgage amount, and since the payment amount remains the same, the A.P.R. is higher than the interest rate. It would be 14.62%. If this applicants loan were approved he would still receive a $50,000 loan for thirty years with monthly payments @ 14% or $592.44

Will my payments be affected by the disclosure statement?

The Disclosure Statement only discloses your estimated payments. The interest rate determines what your monthly principal and interest payment will be.

What is FINANCE CHARGE?

The Finance Charge is the cost of credit. It is the total amount of interest calculated at the interest rate over the life of the loan, plus prepaid finance charges and the total amount of mortgage insurance charged over the life of the loan. This figure is ESTIMATED on the Disclosure Statement and is estimated in any adjustable rate transaction.