The Truth in Lending Disclosure Statement is a document that discloses to the borrower all the costs involved in making and closing the loan. The lender is required to give this to the borrower within three business days of the loan application. For home purchase loans, this statement may be revised just before closing because it is based on the Good Faith Estimate of closing costs. This statement can be confusing to the borrower. It has (5) primary boxes:

Annual Percentage Rate (APR):

The annual percentage rate or APR is the cost of a borrower’s credit as a yearly rate. This APR is defined by the federal Truth in Lending Act, as included finance charges, as well as, the contractual rate. The APR shown on the Truth in Lending Disclosure Statement is always higher than the interest rate shown on the note and mortgage. This does have a tendency to confuse the borrower.

Finance Charge:

This is the dollar amount the credit will cost you. It is your estimated closing costs.

Amount Financed:

The amount of credit provided to you or on your behalf. It is you loan amount.

Total of Payments:

The total amount of money you will have paid after you have made all scheduled payments. This amount is usually a very large dollar amount, because most often it spans a twenty-five (25) to thirty (30) year mortgage term. The figure is a total of all interest you will pay over the life of the loan plus the original mortgage amount.

Your Payment Schedule:

This area of the statement shows the breakdown of your monthly payments. It sets out the principal and interest amounts, as well as, all tax and hazard insurance amounts and how those payments are to be made. It also indicates any late payment charges or prepayment charges.

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