Annual percentage rate (APR)is theannual cost of credit expressed as
a percentage. The Federal Truth and Lending Law requires lenders to disclose
the true annual interest on consumer sales, as well as the total dollar
cost and other terms of a loan. It is commonly used to compare loan programs
from different lenders.
The following fees are generally included in the APR:
- Points - both discount points and origination points
- Pre-paid interest. The interest paid from the
date the loan closes to the end of the month. Most mortgage companies assume
15 days of interest in their calculations. However, companies may use any
number between 1 and 30!
- Loan-processing fee
- Underwriting fee
- Document-preparation fee
- Private mortgage-insurance
The following fees may be included in the APR:
- Loan-application fee
- Credit life insurance (insurance that pays off
the mortgage in the event of a borrowers death)
The following fees are normally not included in the APR:
- Title or abstract fee
- Escrow fee
- Attorney fee
- Notary fee
- Document preparation (charged by the closing agent)
- Home-inspection fees
- Recording fee
- Transfer taxes
- Credit report
- Appraisal fee
