The Federal Truth-in-Lending (REG-Z) and the Good Faith Estimate-RESPA provide important information about your loan application.

The Federal Truth-in-Lending form, often referred to as REG-Z, contains figures that may seem confusing and unrelated to the loan amount and interest rate discussed at the time of your application. The following brief explanation should answer any questions you might have.

ANNUAL PERCENTAGE RATE (APR): The APR shown on the top left-hand side of the REG-Z is NOT the rate used to calculate your MONTHLY PAYMENTS. The APR reflects some of the closing costs charged by the lender that you will pay in connection with the loan. These closing costs are generally referred to as PREPAID FINANCE CHARGES.

FINANCE CHARGE: The finance charge shown at the top of the REG-Z next to the APR represents the total amount of interest that you will pay over the life of the loan. In other words, the finance charge is the amount you will pay in dollars for the benefit of borrowing money.

AMOUNT FINANCED: The amount financed also shown at the top of the REG-Z is not the amount of your loan. The amount financed is calculated by subtracting the PREPAID FINANCE CHARGES mentioned above from your actual loan amount. Once calculated, the amount financed is used in determining the APR as previously described.

TOTAL OF PAYMENTS: The total of payments is the sum of the principal and interest payments and any mortgage insurance if applicable you will pay over the life of the loan. If you add all of your monthly payments from start to finish, providing you keep your loan for the specified term, you will have calculated the total of payments.

Please sign all copies of the FEDERAL TRUTH-IN-LENDING DISCLOSURE STATEMENT and the GOOD FAITH ESTIMATE-RESPA to acknowledge that you have received and read the information on the forms. Your signature does not create an obligation with your lender to accept the terms of the loan as stated.

After reading and signing the two forms, please return them to the office where you applied for the loan. Remember to keep a copy for your records.

If you have any questions please refer to the booklet entitled "Settlement Costs, a HUD Guide". Should you have any other questions, please contact your loan representative

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