TILA Mortgage Loan Officer Practice Test

The finance charge of a loan includes all the costs associated with obtaining the loan that are expressed as a dollar amount. This encompasses various fees that the borrower is required to pay in order to secure the financing.

Loan origination fees are one of the key components of the finance charge. These fees are charged by the lender for processing the loan application, underwriting the loan, and other related services. Including these fees in the finance charge provides borrowers with a clearer understanding of the true cost of borrowing, as it helps to illustrate the total expense incurred to acquire the loan.

In contrast, mortgage insurance and property insurance are typically not included in the finance charge because they relate to the ongoing costs of owning the home rather than the cost of obtaining the loan itself. Similarly, taxes associated with homeownership do not factor into the finance charge; they are separate and generally recurring expenses that the owner is responsible for throughout ownership, but they are not part of the costs when initially obtaining the mortgage.

Therefore, loan origination fees are rightly classified within the finance charge, accurately reflecting the expenses borrowers should anticipate when securing their mortgage loan.