Posted by Craig / CA
on March 24, 2009, 12:12 pm, in reply to "Keep going, Renee!"
69.235.2.50
Since working at a bank, I was required to explain the difference when signing our own documents.... I break it down like this.
I point to the APR, and say... this is not your loan rate, I will come back to this number... but don't worry about it. I then go through the remainder of the TIL, and have the mortgage flagged to show them the actual rate.
I then explain the difference. The fed goverment created this number to allow you to shop different loans and enable you to compare apples to oranges, to pears. It's hard to understand the differences between rates on Fixed, adjustable, balloon loans ect. They assume the average person stays in a house 7 years. They require the lender to spread your costs over those 7 years, and represent those costs along with your actual rate over a 7 yrs period. While not perfect it allows you to compare the different loan products on the market to each other in some sort of equal footing.
Not only does this alleviate their concerns... but they love the non technical explanation when their loan officers said they didn't have a clue what it meant except (don't worry about it.... which only puts them on the edge even more)
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