What is Truth in Landing Act?

Have you ever heard of the Truth in Lending Act? If and when you apply for a mortgage you may want to know exactly what this means for you. The Truth in Lending Act (also known as TILA) requires a mortgage lender to provide you with clear written information about the annual percentage rate (APR), terms of the loan and total costs associated with the mortgage. According to the Act, the lender must give you a copy of these details for you to keep before they charge you for any application fees with the exception of a credit check. This helps the buyer by giving them a way to compare different types of loans to find the one that best suites their financial situation. Want to know more about this mortgage law? Here's everything you need to know about Truth in Lending Act to make you a well informed home buyer.


The United States Congress passed the Truth in Lending Act (TILA) on May 29, 1968 in order to promote economic stabilization throughout the country by protecting the lender and allowing them to compare credit offers when making large purchases. The Act was first introduced in the U.S. Senate by a democratic senator from Wisconsin by the name of William Proxmire. After passing through both the House and the Sentate, the Truth in Lending Act was signed into law by then President Lyndon B. Johnson. TILA is broken up into multiple subparts which define specific regulations for different instances. For example, subpart B refers to open-end credit lines including home-equity lines of credit and subpart C relates to closed-end credit such as home mortgage loans. Since the Act's inception, many other laws have been passed to protect consumers including the Real Estate Settlement Procedures Act (RESPA), which added even more disclosure requirements for lenders.

How It Works

When applying for a mortgage, your lender must provide you with a “good-faith” estimate disclosure for the loan within three days of the application. The estimate report should clearly define any finance charges, the interest and the annual percentage rate (APR). It should also include details such as the number of payments, penalties for late payments and prepayment penalties.

Penalties for Non-Compliance

There are quite a few penalties lenders can face if they deliberately don't comply with the Truth in Lending Act. If a lender doesn't provide the consumer with a full Truth report, the buyer can then sue the company for reimbursement. According to the Fair Debt Collection website, lenders can avoid these penalties if they prove that the overlook was an honest mistake or by fixing the error within 60 days.

Of course there are many more details regarding TILA, but these are just the basics every consumer should be aware of. Now that you know everything you need to know about the Truth in Lending Act (TILA) you should be ready to purchase a new home with confidence. Just be aware that the information provided by the lender is only an estimate and the rates could rise at any time until you lock it in.

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