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Truth in Lending Act: Protecting the Buyer and Seller

Gabriel Traverso
LoanBiz Columnist

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Article Rating , 4 out of 5 based on 1 votes

Mortgage closing costs are regulated by the Truth in Lending Act. What does this mean for the home buyer and seller? How does it protect you?

Closing Costs 

Closing costs are all the fees, for either the home buyer or seller that is above and beyond the actual price of the home. They can include, but are not limited to:

  • Appraisal Fees
  • Attorney Fees
  • Title Service Costs
  • Brokerage Commission
  • Mortgage Application Fees

The Truth in Lending Act requires that all closing costs are itemized prior to the closing of the home. This means that both the buyer and the seller will know exactly how much they will need for closing and where the money is going.

Truth in Lending Act

The Truth in Lending Act was created in 1968 to regulate the clear disclosure of the terms of any lending arrangements. This means that all points of a home loan need to be detailed prior to a home closing. This protects you when buying a new home from the danger of hidden fees, costs, or unclear interest rates.  Regulation Z of the Truth in Lending Act also includes a provision for full disclosure of the terms of adjustable rate mortgages. This helps new home buyers understand the minimum and maximum interest rates that can be expected with their adjustable rate mortgage. It also gives the buyer another opportunity to back out if the mortgage doesn't fit their needs.

Mortgage Homework

There are plenty of ways to ensure you are getting the best deal on closing costs possible as you shop for your mortgage, but the best is to ask for a Good Faith Assessment from each mortgage lender. These act as estimates of your projected closing costs. By doing you research, and understanding your rights as identified by the Truth in Lending Act, you can ensure your mortgage is the best for you.


About the Author
Gabriel Traverso is a freelance writer, professional musician, and artist. He resides with his family in Reno, NV.

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