Posted by kcNot on 1/5/05 11:48pm
Msg #15574

Amount Financed in TIL

Can someone explain why the "amount financed" in the TIL is not the same as the "loan amount"? Thanks.

Reply by Becca/FL on 1/6/05 12:02am
Msg #15576

Mtg. amount
- Pre paid closing cost
__________________
= Amount Financed on the TIL

Reply by Shane_IN on 1/6/05 12:02am
Msg #15577

The Amount Financed in the TIL is the loan amount minus the Closing Costs that are rolled in.
This is also why the APR is higher than the Actual Interest Rate. If the borrower were to pay their closing costs in Cash instead of rolling them into the loan, those numbers would be the same.

Reply by Becca/Fl on 1/6/05 12:19am
Msg #15579

Not always Shane. Though, I do like your easy explanation.

I've seen some interest only loans show a lower APR than interest rate. I had a LO at a closing and he said he was very interested to hear how I explained this to the borrower. He was happy with my answer. I am no math wiz so I don't go into a lot of detail re: the TIL. I always go back to the Note rate.

Paul (PAW) or someone had an excellent explanation of the TIL and the APR. Those of you who are interested may want to do a search.

Reply by Bob-Chicago on 1/6/05 12:36am
Msg #15581

Not quite

Amnt financced is the loan amount less those items shown on the"itemization of amount financed" form Generally : loan costs paid at closing or prior to closing by bwr, even if lender gives credit to bwr. or if lender of broker pays the costs for bwr, plus pre-paid interest (usually to end of month), mortgage insurance, , but not title , escrows, closing fees and recording fees.
Generally hud items 700 through 902 including items shown as POC
Bit more complcated but it is late
Had one today where the only thing paid by bwr at close was pre-paid interest of $853. 25 plus tax and ins escorws of $4,768.89. Amount deducted to arrive at amnt financed was about 2,300 with all but pre-paid interest and escrows being paid by broker. Appraisal was also included even though pre-paid by bwr and credited to bwr on line 205 of hud
My standard line is to say "apr spreads some of your closing costs over the life of the loan
(even if you don't pay all of them yourself {if needed} Amt financed is loan amount less certain of you closing costs" Usually works. Show them note first so that they know actual loan amnt and interest rate.

Reply by Gregg Amicon on 1/7/05 1:09am
Msg #15672

Re: Not quite

This is the most difficult concept to explain in few words.

Make sure you've already reviewed the note so they see the note rate.

Have the itemization handy so you can pull the number from the itemization and show the short list of fees deducted to yield the amount financed.

Then, I say that "the amount financed is 'the non-fee-related borrowing' and the finance cost is the interest on the full note amount. Therefore the APR usually increases because you are showing 100% of the interest cost against less than 100% of the borrowed amount. This helps borrowers compare loans. A high-cost loan's APR would rise more than a lower-cost loan."