TILA/Regulation Z requires lenders to clearly disclose the APR, which includes not only the interest rate but also certain fees and charges, making it easier for borrowers to compare loan offers. TILA provides a 3-day right of rescission for refinance transactions on a primary residence (but NOT for purchase money loans). Regulation Z also governs advertising: if a trigger term (specific credit terms like down payment, monthly payment, or interest rate) is used in an ad, full disclosure of all credit terms is required.
A lender advertises "Only $1,500 per month!" This monthly payment is a trigger term under Regulation Z. The ad must also disclose the APR, number of payments, amount of down payment, and total of all payments. Failure to include these disclosures violates TILA.
Know the trigger terms for advertising: down payment, monthly payment, number of payments, interest rate, or finance charge. If ANY trigger term appears, ALL credit terms must be disclosed. The APR is NOT a trigger term—it can be stated alone without triggering full disclosure. Remember: 3-day right of rescission applies to refinances, NOT purchase loans.
Related Terms
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Frequently Asked Questions
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TILA (Truth in Lending Act) may have state-specific rules. Choose your state to study Financing with localized content: