Consumer Handbook on Adjustable Rate Mortgages

Your first information about mortgages probably will come from from newspaper advertisements placed by builders, real estate brokers, and lenders. While this information can be helpful, keep in mind that the ads are designed to make the mortgage look as attractive as possible. These ads may play up low initial interest rates and monthly payments, without emphasizing that those rates and payments later could increase substantially. Get all the facts.

A federal law, the Truth in Lending Act, requires mortgage gage advertisers, once they begin advertising specific terms, to give further information on the loan. For example, if they want to sho the interest rate or payment amount on the loan, they must also tell you the annual percentage rate (APR) and whether that rate may go up. The annual percentage rate, the cost of your credit as a yearly rate, reflects more than just a low initial rate. It takes into account interest, points paid on the loan, any loan origination fee, and any mortgage insurance premiums you may have to pay.

Disclosures From Lenders Federal law requires the lender to give you information about about adjustable-rate mortgages, in most cases before you apply for a loan. The lender also is required to give you information when you get a mortgage. You should get a written summary of important terms an costs of the loan. Some of these are the finance charge, the annual percentage rate, and the payment terms.

Selecting a mortgage may be the most important financial cial decision you will make, and you are entitled to all the information you need to make the right decision. Don't hesitate to ask questions about ARM features when you talk to lenders, real estate brokers, sellers, and your attorney, and keep asking until you get clear and complete answers. The checklist at the back of this pamphlet is intended to help you compare terms on different loans. GLOSSARY

Annual Percentage Rate (APR)

A measure of the cost of credit, expressed as a yearly rate. rate. It includes interest as well as other charges. Because all lenders follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. Adjustable-Rate Mortgage (ARM)