Posted by Charlie on 6/18/04 5:24pm
Msg #3205

FL

HELP !! Can someone who knows FL docs , tell me why is the APR is not the same on the " Truth in Lending Disclosure " and the note . But the payment is the same . THANKS

Reply by HisHughness on 6/18/04 5:56pm
Msg #3206

The note contains the interest rate. The TIL contains the Annual Percentage Rate, a different animal; it is the interest rate plus the cost of originating the loan, annualized. It is much like buying a car where the cost of the car is jacked up by the costs of tax, title and license. On a home, the original cost of the money you borrow (the interest) is jacked up by adding the cost of appraisals, surveys, attorney fees (gotta love it), origination fees, etc., and becomes a larger figure called the "Annual Percentage Rate." The total cost is then broken down by the number of years on the loan and is given as a percentage of the amount financed, or borrowed.

I.e., $240,000 loan for 20 years, total interest $12,000 = 5% interest
Add $6,000 costs to originate loan, total becomes $18,000 = 7.5% APR

One of the advantages of the signing agent certification courses is that they address such fundamental matters -- and the explanation of the APR is fundamental. It is not peculiar to Florida.

At the very least, Victoria Ring used to have a short signing agent familiarization on her ColumbusNotary website. Not the best, and I don't even know if it's still available, but you surely need to plug into something like that as soon as possible.

Now, can someone who is a helluva lot smarter than I tell >>me<< why the APR on an ARM is usually lower than the interest? This is your chance, Dennis.

Reply by Charlie on 6/18/04 7:39pm
Msg #3209

THANK YOU

Reply by Not Dennis on 6/18/04 7:58pm
Msg #3211

APR on ARM is lower

On some of the ARM loans where the APR is lower than on the note, I have noticed that there is a preliminary discount period (usually 2-3 years) where the rate is actually lower than prime.

We will wait for Dennis to give us a more comprehensive and wordy answer!

Reply by Dennis D Broadbooks on 6/18/04 10:18pm
Msg #3217

Not This Kid!

I know when to play dumb!

Reply by Charlie on 6/19/04 6:44pm
Msg #3227

I just want to thank everyone for helping with this question

Reply by Bob-Chicago on 6/21/04 1:00am
Msg #3257

I respectfully disagree

In all due respect, Hugh, I believe the the computation is as follows:
Loan amount $482,000 - Int 6.5% fixed, 30 yr -pmt $3,046.
Loan cost per itemiztion of amt financed - $12,644
Net amount available to borrower is the loan amount less loan costs = $469,356
A $469, 356 loan for 30 yrs with a monthly payment of 3,046 would have an interest rate of 6.757% That would be the apr in this case
The APR essentially shows the effective interst rate for the life of the loan after deducting the "loan costs" as defined in Reg Z which, in effect reduces the amount available to the borower.
The above is based on an actual set of loan docs
In the case of a variable rate, the computation is based on differnecent factors related to possible changes to the loan rate over the life of the loan. That is a whole different topic.

Reply by HisDulyEnlightenedHughness on 6/21/04 8:09am
Msg #3262

Re: I respectfully disagree

I love this forum. I haven't learned so much since a speeding ticket put me in defensive driving school. Except, of course, that I actually >>use<< what I learn here.

If I understand correctly, Bob, you're saying that the APR is determined by subtracting certain specified costs of the loan from the amount financed, thus boosting the effective interest rate. Whereas, I apparently incorrectly added the total costs of the loan origination to the total costs of the interest, thus arriving at the APR.

With regard to the APR on an ARM, I still fail to see why the interest rate would be lower than the APR because of the variability of the interest. That, it seems to me, would lower the APR only if the interest rate in later years declined below the initial rate.

One other thing. Please don't accord me "all due respect." I'd like to retain some modicum of esteem around here.

Reply by MELANIE on 6/21/04 1:46pm
Msg #3280

Re: I respectfully disagree

I CASE ANYONE WAS WONDERING: MODICUM MEANS - A SMALL AMOUNT. I PERSONALLY HAD TO LOOK THAT ONE UP. YOU DID GOOD; MR.HISDULYENLIGHTENED HUGHNESS.

:)

Reply by Bob=Chicago on 6/21/04 1:58pm
Msg #3284

Correct

As to a variable rate loan. they may make a guess of some sort as to what the rate might be after the change date, Usuallly they use the max increase, but sometimes I have seen them anticapate a lower rate in the future, (yeah, right?)
in any event we, Dems gotta stick together.
Just stopped in to pick up my AM deliveries,. Gotta run

Reply by jamie/fl on 6/19/04 8:53am
Msg #3221

Not only in Florida...

This is not a state issue...this could happen with all loans anywhere nationwide.

The APR is figured on FINANCE CHARGES. Finance charges include INTEREST and PREPAID FINANCE CHARGES.

INTEREST is what you find on the NOTE.

PREPAID FINANCE CHARGES are costs doing the loan (i.e. origination fee and some of the other charges listed on your HUD/Settlement Statement)

Therefore, if you have any PREPAID FINANCE CHARGES on the HUD/Settlement Statement then the APR will be different from the Interest Rate.

You may notice that the AMOUNT FINANCED is less than the LOAN AMOUNT on the note as well. This is because the AMOUNT FINANCED = LOAN AMOUNT less any PREPAID FINANCE CHARGES.