FAQ
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What fees are included in the APR?
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 are SOMETIMES 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
Calculating APRs on adjustable and balloon loans is even more complex because
future rates are unknown. The result is even more confusion about how lenders calculate APRs.
Do not attempt to compare a 30-year loan with a 15-year loan
using their respective APRs. A 15-year loan may have a lower
interest rate, but could have a higher APR, since the loan
fees are amortized over a shorter period of time.
Finally, many lenders do not even know what they include in
their APR because they use software programs to compute their
APRs. It is quite possible that the same lender with the same
fees using two different software programs may arrive at two
different APRs!
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