Q: Why must I sign the disclosure statement? | Top
A: Lenders are required by law to provide the information on this statement to you in at timely manner. Your signature merely indicates that you have received this information, and does not obligate either you or American Mortgage, Inc.
Q: My statement says that if I pay the loan off early, I will not be entitled to a refund of part of the finace charge. What does this mean? | Top
A: This means that you will be charged interest for the period of time in which you used the money loaned to you. Your prepaid finance charges are not refundable. Neither is any interest which already been paid. If you pay the loan off early, you should not have to pay the full amount of the "finace charges" shown on the disclosure. This charge represents an estimate of the full amount the loan would cost you if the minimum required payments were made each month through the life of the loan.
Q: What is the "total of payments"? | Top
A: This figure indicates the total amount you will have paid, including principal, interest, prepaid finance charges, and mortgage insurance, if you make the minimum required payments of the entire term of the loan. This figure is estimated on the Disclosure Statement and is estimated in any adjustable rate transaction.
Q: What is the "finance charge"? | Top
A: The "finance charge" is the cost of credit. It is the total amount of interest claculated at the interst 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 given with your application.
Q: How will my payments be affected by the disclosure statement? | Top
A: The disclosure statement only discloses your estimated payments. The interest rate determines what your monthly principal and interest payment will be. The payment disclosed does not include the escrow for taxes and insurance or the monthly association fee.
Q: Why is the annual percentage rate different from the interest rate for which I applied? Why is the "amount financed" different? | Top
A: 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, $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 30 year term. Since the A.P.R. is based on the net amount financed, rather than on the actual amortgage 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 applicant's loan were approved he would still receive a $50,000 loan for 30 years with monthly payments at 14% of $592.44.
Q: What is the "annual precentage rate"? | Top
A: 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. disclosed is higher than the interest rate on your loan. The A.P.R. can be compared to other loans for which you may have applied and gives you a fair method of camparing price.
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