Real Estate Principles Tenth Edition An Introduction to the Profession Tenth Edition

Chapter 12 The Loan and the Consumer _________________________________

Regulation Z Truth-in-Lending Act Requires lender to show the borrower the cost of the credit. Requirements include: Amount financed Finance charge Annual percentage rate Total payments

APR Annual percentage rate combines the interest rate with the other costs of the loan into a single figure that shows the true annual cost of the loan.

Right to Rescission Borrower’s right to cancel a credit transaction. Three business days after signing to back out. Includes Saturdays. Does not apply to credit used for the acquisition or initial construction of your principal dwelling.

Triggering Items and Disclosures Mention these Triggers disclosure Down payment Any payment Number of payments Period of payments Amount of any finance charge, or statement: no charge for credit Cash price or the amount of the loan Down payment (or none) Number, amount, frequency of payments Annual percentage rate (APR) Deferred payment price or total payments

Loan Process Lenders Qualify: Borrower Property Title

Redlining Refusing to make loans in certain areas. No Loans! $ $ $

Credit Report Provides lender with independent means of checking borrower’s credit history. Fair Credit Reporting Act – consumer right to their file at credit bureau. Credit Scoring – method used today to evaluate credit risk.

Key terms APR Credit report Fair credit reporting act Finance charge Liquid asset Redlining Regulation Z Truth-in-Lending act