The following fees are generally included in calculating the APR:
- Points: discount points
- Prepaid interest: the interest paid from the date the loan closes to the end of the month
- Lender fees (which vary by lender) such as:
- Private mortgage insurance
A Good Tool for Comparing Loans
APR regulations are subject to interpretation, and all lenders do not calculate APR exactly the same. However, the APR is a good tool to compare loans. The Good Faith Estimate from each lender is a helpful tool for comparing costs.
Don't Sign a Contract that Makes You Uncomfortable
However, remember that the GFE is an estimate and may vary from the actual costs that you are being charged, which will be listed on the HUD-1 Settlement Statement you receive at closing. If the numbers are very far off, you need to ask for some explanation. If some costs seem unreasonable, you can ask for them to be removed or reduced. Remember, you are signing a legally binding contract. If you don’t feel comfortable with all the terms of the contract, DO NOT SIGN THE DOCUMENTS. You may feel pressured to sign the contract and close the deal since you don’t want to potentially lose the property, but losing the property may be better than getting into a contract with terms you had not considered.