What is Loan Estimate?

The New Loan Estimate (LE) replaces the Good Faith Estimate (GFE) and the initial Truth In Lending document (TIL). The LE provides borrowers with clearer information on loan terms and estimates of loan and closing costs. This will facilitate comparison shopping. It will be provided to all borrowers within 3 business days, after they have submitted their loan applications.

What is Annual Percentage rate (APR)?

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. can be compared to other loans for which you may have applied and give you a fair method of comparing price.

What is Amount Financed?

The amount financed is the mortgage amount applied for MINUS prepaid finance charges and any required deposit balance. Prepaid finance charges include items such as loan origination fees, commitment or replacement fee (points), adjusted interest, and initial mortgage insurance premium. The Amount Financed represents a NET figure used to allow you to accurately assess the amount of credit actually provided.

Why is my Annual Percentage Rate different than my Interst rate and my Amount  Financed different?

The Amount Financed is lower than the amount you applied for because it represents a NET figure. If someone applied for a mortgage of $100,000 and their prepaid finance charges total $3,000, the amount financed would be shown as $97,000 or $100,000minus $3,000 The A.P.R. is computed from this LOWER figure, based on what your proposed payments would be.  the A.P.R. is based on the NET amount financed, rather than on the actual mortgage amount, and since the payment amount remains the same, the A.P.R. is higher than the interest rate.

What is Finance Charge?

The Finance Charge is the cost of credit. It is the total amount of interest calculated at the interest 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 and is estimated in any adjustable rate transaction.

Is it important to sign my Closing Disclosure?

Lenders are required by law to provide the information on this statement to you in a timely manner. Your signature merely indicates that you have received this information, and does not obligate either you or the lender in any way.

What is the difference between a Pre-Qualification and Pre-Approval?

A pre-qualification shows you what you can afford and a pre-approval is confirming with bank statements, pay stubs and credit reports what you have provided verbally for the sake of achieving a full loan approval.

What is private Mortgage Insurance (PMI)?

Private mortgage insurance is required on conventional loans and may allow you to purchase a home for as little as 5% down. This coverage requires a monthly insurance fee to be paid. PMI is only required if your loan-to-value is 80% and above.

What will my Interest Rate be?

Interest rates are based on variety of factors including by not limited to; loan purpose, credit history, ability to repay, and loan amount.