Significance

• Borrowers refinancing their mortgages are required to sign a number of documents that outline the details of the new mortgage. The two main documents are the good faith estimate and the truth-in-lending disclosure.
  
  

Function

• The good faith estimate outlines the fees associated with the refinance. The truth-in-lending statement spells out the APR (annual percentage rate), which is the numerical representation of the total cost of the loan for a year.
  
  

Legal Protection

• The Equal Credit Opportunity Act applies to any mortgage refinance. A lender cannot deny you a mortgage for any reason other than your potential to repay the debt, based on credit and income.
  
  

Considerations

• The documents and guidelines placed on lenders for borrower notification help to prevent borrowers from being victims of predatory lending.
  
  

Misconceptions

• While the good faith estimate and truth-in-lending statement provide the borrower with the information needed to determine the cost of the mortgage, they do not prevent her from being overcharged. A borrower should shop around to make sure she is getting the best loan.