What Is a Truth in Lending Statement on a Mortgage Loan?
The Truth in Lending Statement is a disclosure or document given to mortgage borrowers to outline the overall expense of the mortgage itself. It lists the APR (annual percentage rate) and the overall interest expense of the mortgage over the life of the loan.
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Significance
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The Truth in Lending Statement gives the borrower the ability to compare one mortgage loan to another through the APR. Each lender has to calculate APR in the same way.
Function
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The APR is the numerical representation of the total cost of the mortgage for one full year, including closing costs and monthly interest rate.
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Time Frame
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The Truth in Lending Statement must be given to the borrower within three days of a complete mortgage application. Additional copies must be provided to the borrower if any significant change occurs with the APR due to changes in fees.
Considerations
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The Truth in Lending Statement is a good basis for comparison; however, if the fees change during the course of the mortgage process, the original document becomes useless.
Misconceptions
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The APR is not the same rate as the monthly interest rate. The APR is always higher than the monthly interest rate.
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References
- Photo Credit Young freckled woman sitting at the table with document image by Vasiliy Koval from Fotolia.com
