Annual Percentage Rate (APR) Made Easy

Authored By: Dennis Estrada

To fully understand and grasp Annual Percentage Rate (APR), there are terms to keep in mind. When you finally understand each mortgage term and definition, you can understand the basic concepts of APR. APR is short for Annual Percentage Rate which means true cost of borrowing. The fees below may be included in APR.

Points

- Mortgage Lenders levied this charge at closing. A point represents one percent of face value of mortgage loan.

Pre-paid interest

- It is the interest charged to borrowers at loan closing to pay for the cost of borrowing for a partial month. For example, if a loan closes on the first of the month and the first payment is due 10 days later, the lender will charge 10 days of prepaid interest.

Mortgage Insurance

- The borrowers are usually required to pay when loan to value ratio exceeds 80%. This insurance protects the mortgage lender from default of mortgage payments.

Title or abstract, Escrow, Attorney, Closing, and Notary fee

- The agent charges for their services.

Recording fee

- The cost obtained in writing or entering an instrument in a book or public record

Appraisal and Credit report fee

- Mortgage Lenders collect to pay the appraisal and credit-report Company.

Processing, Underwriting and Document Fees

- Charges for the lender's services associated with making the loan.

Dennis Estrada is webmaster of a mortgage calculators website which provide resources, and calculators for mortgage and real estate.

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