What is Regulation Z?

When you apply for a mortgage or most any type of credit in background you have benefited from Regulation Z. Regulation Z protects consumers as they contemplate opening new credit. The direct benefit is the disclosure to the consumer of exactly what the costs will be for borrowing money or opening a credit card. Not only is this the interest rate but the finance costs associated with it as well.

Regulation Z is part of the Truth in Lending Act (TILA) which is meant to protect consumers from bad lending practices. It provides the consumer with disclosures provided by the creditor to inform consumers about the cost of the loan along with any terms and conditions.

If you have shopped for a mortgage, you may have heard of the term APR. This stands for Annual Percentage Rate. Basically, it is a number stated as a percentage which factors in the costs of the loan. You then in theory can compare one lender’s APR with another lender’s APR and the one with the lower APR should be the better loan.

One of the first documents you receive from a mortgage lender is the initial Loan Estimate. This document will provide all the details including the loan amount, interest rate, estimated monthly payment and the closing costs. You will also receive a final Closing Disclosure 3 days prior to your closing date to review in case any numbers shifted.

Regulation Z is a good tool to protect consumers and it is always wise for you to work with a trusted mortgage professional who can explain all the details of your mortgage loan.