PSI Virginia Real Estate Practice Exam

What type of information does a Truth-in-Lending Disclosure Statement provide?

1. Legal obligations of the borrower's credit history

2. The cost of credit, including the APR of the mortgage loan

3. Tax implications of mortgage interest

4. Future credit limits and eligibility

The correct answer is: The cost of credit, including the APR of the mortgage loan

A Truth-in-Lending Disclosure Statement is designed to provide critical information about the cost of credit associated with a loan, primarily focusing on the Annual Percentage Rate (APR). The APR is a crucial figure because it represents the true cost of borrowing money over the life of the loan, expressed as a yearly percentage. This allows borrowers to understand how much they will pay in interest and has the added benefit of enabling them to compare different loan offers from various lenders effectively. The disclosure statement also outlines various other costs associated with the loan, such as finance charges, total payment amounts, and any additional fees, all of which contribute to a transparent understanding of the financial commitment the borrower is about to undertake. This emphasis on clear communication is intended to help borrowers make informed decisions when selecting a mortgage or any form of credit. In contrast, the other options mentioned provide information that does not align with the primary focus of the Truth-in-Lending Disclosure Statement. For example, the legal obligations of a borrower's credit history do not apply as this statement is not about legal responsibilities but rather the terms and costs of credit itself. Similarly, tax implications of mortgage interest would relate more to tax regulations rather than the cost of obtaining credit, and future credit limits and eligibility pertain