DEFINITIONS OF TRUTH-IN-LENDING TERMS

The following are definitions of some of the terms which are used in Truth-in-Lending disclosures which are required by federal law. The disclosures are provided to enable an applicant to compare the mortgage terms of various lenders.

Prepaid Finance Charges:

PREPAID FINANCE CHARGES are those direct loan charges, paid by the borrower (not a third party), that are required by Truth in Lending regulations to be included in computing the Annual Percentage Rate. They include, but are not limited to: loan origination, discount, and commitment fees; prepaid private mortgage insurance premiums (PMI); prepaid FHA mortgage insurance premiums (MIP); VA funding fee; underwriting, processing, tax service, and messenger fees, if paid to the lender; buydown and shortfall funds; and prepaid interest.

Annual Percentage Rate (APR):

The APR is not the same as the note interest rate, if there are any PREPAID FINANCE CHARGES or buydown fees paid by the borrower. The APR takes into account all of these charges and fees and gives the applicant(s) a way to measure and compare the effective annual interest cost of the loan.

Finance Charge:

The total cost of credit as a dollar amount. It is the total of PREPAID FINANCE CHARGES plus the total interest and mortgage insurance premiums, if any, which would be paid over the life of the loan, if paid according to the Payment Schedule. If the loan is based upon an adjustable rate of interest, the FINANCE CHARGE will be subject to change if the interest rate varies.

Amount Financed:

This is not the loan amount. It is the amount requested as a loan by the applicant (including any MIP which is to be financed), less applicable PREPAID FINANCE CHARGES paid at closing.

Total of Payments:

This amount is usually the total of the Finance Charge and the Amount Financed. It is the total of PREPAID FINANCE CHARGES, plus principal, interest and mortgage insurance premiums, if any, which would be paid over the life of the loan, if paid according to the Payment Schedule. If the loan is an adjustable rate mortgage, the amount may be subject to change if the annual percentage rate changes.

The above definitions are intended to assist the applicant(s) in better understanding Truth in Lending disclosures. The definitions are only intended to be short summaries. Applicant(s) with legal questions should consult their own attorney for advice.