Jan

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Truth N Lending (TIL)

Filed Under mortgage 

The TIL is a disclosure document, that goes over APR and total fees packaged into the loan. The TIL, allows the borrowers to compare “apples to apples” with different mortgage loans. APR has no effect on the payment amount just the amount of fees financed into the loan.

The Truth In Lending (TIL) will also show the payment schedule for you loan. If you have a Fixed Rate Loan the TIL will show you what your Principal and Interest payments will be for the entire loan. If you have an Adjustable Rate Mortgage (ARM) the TIL will show what the payments are during any fixed period and an estimate of what may happen during the adjustable period. The TIL also shows the total amount of all payments on the loan. It is common for this number to be two or three times the original amount of your loan.

One of the information on the Truth-in-Lending disclosure form that draws the most attention is the Annual Percentage Rate (APR). The APR is almost always higher than the interest rate the loan officer quotes at application. One need not be alarmed. This is due to the fact that the APR is calculated by adding other fees that are associated with the mortgage process, such as underwriting fee and processing fee, to the qualifying interest rate. The APR is not used for calculation of the monthly payments. It is only meant to show the total cost of the loan, with the applicable fees included.

The APR is what you should use to compare mortgages if you are shopping. This will take into consideration any fees and points that are being charged. If you compare 2 lenders on the same loan amount and interest rate, the lower APR will tell you which loan you are being charged less fees on.

The APR on the Truth in Lending statement can be a bit misleading for customers as the underlying formula used to calculate Annual Percentage Rate on mortgages incorporates many fees which are not amortized into the loan. Please discuss this point with your loan officer or mortgage banker.

Depending on which state you live in, your mortgage professional may be required to provide you with a TIL Disclosure within three business days from the day you filled out an application for a mortgage.

The TIL is a document that is better used for comparing loan programs versus just comparing interest rates because you are taking into consideration all costs of acquiring the loan. One thing to look at closely is what items are checked marked on the GFE to be included in the Annual Percentage Rate on the TIL. The fees which need to be included in the APR are outlined by the federal government but that doesn’t mean that every broker is using the guidelines properly.

Always check your TIL for whether or not you have a pre-payment penalty.

Mortgage lenders are required to give you a truth in lending (TIL) statement containing information on the annual percentage rate, the finance charge, the amount financed, and the total payments required.

Is your rate too high? If you're looking to compare mortgage rates or to get a rate quote on a FHA loan start here


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