Q: What is a Federal Truth in Lending Disclosure Statement?

A: Federal law requires that a lender disclose to a borrower all costs associated with borrowing money. At a residential closing, a lender must provide to a borrower a Federal Truth in Lending Disclosure Statement, aka the TIL.

The TIL lists the following items: annual percentage rate, or APR; finance charge; amount financed; and total of payments.

Amount financed is the amount of money the borrower can actually use toward the home purchase. This figure is the net amount credited to the borrower at closing, minus any prepaid finance charges such as discount points, loan origination fees, and prepaid interest. For example, on a loan amount of $100,000, in which the total prepaid finance charges paid to lender at closing total $5,000, the amount financed will appear on the TIL as $95,000.

APR is a percentage based on the total amount financed over the life of the loan, and it factors in any prepaid finance charges. APR is disclosed to the borrower in the form of a yearly percentage rate. The APR is usually greater than the interest rate that the borrower pays on the promissory note because it includes the upfront costs associated with the loan.

The finance charge is the dollar amount it costs the borrower over the life of the loan. Total of payments is equal to the finance charge plus the amount financed.

This column is designed to provide information in regard to the subject matter covered. It is not intended to render legal advice.

Q: What is taxable gain?

A: The amount received on the sale of property greater than the amount it was purchased for. The difference may be subject to federal tax.

— By Patrick I. Lucas, associate with Weinstock & Scavo, PC in Atlanta. plucas@wslaw.net

Have question you would like answered in this column? Please contact Jim Scavo at jscavo@wslaw.net or send your question to Jim Scavo, Weinstock and Scavo, P.C., 7 East Congress St. Suite 1001, Savannah, GA 31401.