Reply by Anonymous on 10/5/05 6:15pm
Msg #69055
The APR is the cost of the loan in percentage terms taking into account various loan charges of which interest is only one such charge. Other charges which are used in calculation of the APR are Private Mortgage Insurance or FHA Mortgage Insurance Premium (when applicable) and prepaid finance charges (loan discount, origination fees, prepaid interest and other credit costs. The APR is calculated by spreading these charges over the life of the loan which results in a rate higher than the interest rate sown on your Mortgage/Deed of Trust Note.
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Reply by Art_MD on 10/5/05 8:03pm
Msg #69082
Re: Truth In Lending example
This is the most a**anine doc the government ever invented.
Quick, and hopefully clear, explination....here goes.
Numbers are for example only, I'm using easy to understand numbers.
Loan amount $200,000
interest rate 5%
term 30 years
monthly payment 1,000 (principal and interest only)
Origination fees, prep fees, doc fees, - basically all closing costs except escrow. 10,000
Amount after deduction closing costs 190,000.
So you are getting to use not 200,000 but 190,000.
They then back calculate.... What interest rate on 190,000 would result in a payment of 1,000 a month. It might be 5.34% This is what appears on the TIL.
Hope this is clear.
Art
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