ABA Family Legal Guide

Buying and Selling a Home

Financing a Home Purchase

Applying for a Loan

What is the lender obligated to tell me about the loan?

Federal law requires that the lender reveal all costs of the loan, including such items as appraisal fees, escrow fees, fees for the lender's lawyer, service charges, and, of course, the interest rate on the loan. The interest rate must be presented as the annual percentage rate or APR. This is calculated by including the interest to be paid along with other fees, such as any points paid to originate the loan. Points are interest charges paid up front when a borrower closes a loan or fees imposed by a lender to cover certain expenses of making a real estate loan. They are usually a percentage of the amount loaned--for example, one point is 1 percent.

Under the federal Truth in Lending Act, all lenders are required to use the same methods for computing the cost of credit and disclosing credit terms. This requirement helps borrowers compare the costs and terms of home loans.

The federal Equal Credit Opportunity Act prohibits discrimination in any aspect of a home loan transaction on the basis of race, religion, age, color, national origin, receipt of public assistance funds, sex, marital status, or the exercise of any right under the Consumer Credit Protection Act. If a lender rejects your loan application, you are entitled to know the specific reasons in writing.

Lenders are also prohibited from doing anything that discourages you from obtaining credit, including taking an excessively long time to process your application, being unwilling to discuss available types of loans, or failing to provide information required to apply for a loan. If you suspect that you are being discriminated against in applying for a loan, you can file a complaint. When making a complaint, be sure to include your name and address along with the name and address of the person or financial institution you are filing the complaint against, a short description of the alleged violation, and the date of the alleged violation.