By Gil Mackey
Mortgage Credit Problems Columnist

The Truth in Lending Act was established in 1968 to help regulate lending practices. It requires full disclosure on the costs and terms of your mortgage. This is your tool to make sure you don't pay too much for your bad credit home loan.

If you have bad credit you can probably still qualify for a home loan -- but you represent a greater risk to the mortgage lender. Most mortgage companies handle this risk by charging more for a bad credit mortgage than they would if you had good credit. This means you could pay a higher rate, closing costs, or fees. When your lender prepares the documents for your bad credit home loan they will give you a Truth in Lending form. You'll need to sign this document, stating that you agree to the terms. Before you do, understand what you're reading.

Your Truth in Lending Form

Your Truth in Lending form will outline the following:

• When payments are due
• Amount of each payment
• Finance charge: the total cost of your bad credit mortgage
• Amount financed: the amount you are borrowing for your home loan
• Annual Percentage Rate (APR): includes the interest rate plus the fees you pay for the loan

It also lets you know if there is a prepayment penalty, what insurance is required, and whether someone else can assume the home loan.

It’s Important to Ask Questions!

The Truth in Lending form is designed to help you and your mortgage lender is required by law to give you this form to review before finalizing your bad credit home loan. However, it is up to you to make sure you understand the form. If you don't understand the details, the costs, or anything listed on your Truth in Lending form, then start asking questions. Your mortgage lender should be more than willing to go over it with you until you're clear on all the details and costs.

About the Author

Gil Mackey has been a writer and artist for the past twenty years. In addition to freelancing, he writes for his local paper, and lives with his two children in Nevada.

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