What Does Mortgage APR Include?
If you have already been presented with your loan documents, your APR can be found on the Truth in Lending page. While the actual calculation of the APR can be quite difficult, what is and is not included in the calculation is relatively easy.
The basic rule of thumb as to what is not included in the APR is whether or not that specific item provides a value outside of simply being charged so that you can get your money. For example, the $400 or so dollars that your appraisal costs is not factored into your APR because you get your house appraised for that fee. Another example of something that is not factored into your APR is title fees. Title fees pay for the expense of the title rep present at your closing and title insurance that covers you in the event you have an unexpected lien on a property you just purchased.
Items like origination fees and points are included in the APR, as they provide no value and just like interest, they are charged solely as a premium for the privilege of borrowing the money.
Think of it this way… if it’s a fee related to “getting your mortgage”, then it’s probably included in the APR.
Not Included in APR:
- Appraisal Fee
- Title Fees (Title Insurance, Escrow fees, Doc Prep Fees)
- Attorney Fees (In Attorney states only)
- Notary fee
- Home Inspection fees
- Recording fee
- Transfer taxes
- Credit Report Fee
Items Included in APR:
- Origination Points
- Discount Points
- Mortgage Insurance (PMI)
- Broker and Processing Fees
- Underwriting Fees
- Doc Prep Fees