Mortgage Truth-in-Lending Statement Overview and Example

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

May 21, 2018

Please note that the Truth-in-Lending Statement was replaced by the Loan Estimate effective October 3rd, 2015 and is no longer used in the mortgage process. We provide the Truth-in-Lending Statement Key Features overview below for your reference but recommend that you review the Loan Estimate for more current information

The Truth-in-Lending Statement contains information about mortgage costs and features such as the Annual Percentage Rate (APR) and Finance Charge.

• Review our Overview and Example of the APR for a mortgage

In addition to the APR and Finance Charge the other key item included in the Truth-in-Lending Statement is the Indication of Key Mortgage Features. The Indication of Key Mortgage Features addresses the mechanics of your mortgage such as potential balloon payments, possible changes in interest rate over the term of the mortgage (for Adjustable Rate and Interest Only Mortgages) and other possible costs such as prepayment penalties and late payment charges.

• 

  Truth-in-Lending Statement Overview Video

The table below outlines and describes the key mortgage features addressed in the Truth-In-Lending Statement.

• Other TIL Statement Mortgage Features

  Demand Feature

  • If your loan has a demand feature, which is more commonly referred to as a balloon payment, you are required to pay off the balance of your loan at the end of the term of the loan
  • A loan with a demand feature / balloon payment, typically involves the borrower paying off a significant amount at the end of the loan, as opposed to paying the loan off a little bit every month over the life of the loan
  • The TIL Statement lets the borrower know that he or she is on the hook for this payment

  Variable Feature

  • If your loan has a variable feature, it means that your interest rate could change over the life of the loan
  • Adjustable Rate Mortgages (ARMs) and Interest Only Mortgages have variable features as the interest rate will very likely fluctuate over the course of the mortgage
  • If your loan has a variable feature, the lender is required to provide additional disclosure that estimates your projected monthly mortgage payment at potential future interest rates

  Prepayment penalty

  • Some mortgages require the borrower to pay a penalty if you repay the loan in full prior to a specified term
  • You should avoid prepayment penalties

  Late Charge Policy

  • Fee charged to the borrower if you do not make your monthly mortgage payment on time
  • You should avoid late charges

  Homeowners Insurance Cost (also known as Hazard Insurance)

  • Estimated cost for the borrower to obtain homeowners insurance
  • Required by lender for you to obtain a mortgage

  Mortgage Assumability

  • Indicates if you can transfer your mortgage to another party if someone buys your property
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  Monthly Housing Payments

  P & I Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
  Mortgage Insurance Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%. (Estimated)
  Property Tax Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ... (Estimated)
  Homeowner Insurance Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ... (Estimated)
  Homeowner Association Fee Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs. (If Any)
  Total Monthly Housing Payments

  Lender Fees

  Points Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
  Origination Fee Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
  Credit Report Fee Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
  Tax Service Fee Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
  Processing Fee Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
  Underwriting Fee Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
  Wire Transfer Fee Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower. (If Any)
  FHA Upfront Premium FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception. (If any)
  VA funding Fee (If any)
  Flood Fee
  Other Fees Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees) The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.
  Total Lender Fees

  *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
  Current Mortgage Rates as of December 11, 2018

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  Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
   

Sources

Truth-in-Lending Statement: https://www.consumerfinance.gov/ask-cfpb/what-is-a-truth-in-lending-disclosure-en-180/

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