A buyer is reviewing mortgage disclosures and wants to compare the true cost of borrowing. Which of the following statements about APR is accurate EXCEPT?
Correct Answer
D) APR measures only the note interest rate and ignores points and prepaid finance charges
Because this is an EXCEPT question, the correct answer is the one statement that is not accurate. APR does not measure only the note rate; it is intended to reflect a broader cost of credit that includes the interest rate plus certain prepaid finance charges such as points and some fees.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
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