ANNUAL PERCENTAGE RATE

1. The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth In Lending Act, Regulation Z. APR includes up-front costs paid to obtain the loan, and therefore, is usually a higher amount than the interest rate stipulated in the mortgage note. APR does not include title insurance, appraisal, and credit report. 2. It also is not the note rate for which the borrower applied. The APR is the cost of the loan in percentage terms taking into account various loan charges of which interest is only one such charge. Other charges which are used in calculation of the APR are Private Mortgage Insurance or FHA Mortgage Insurance Premium (when applicable) and Prepaid Finance Charges (loan discount, origination fees, prepaid interest and other credit costs). The APR is calculated by spreading these charges over the life of the loan that results in a rate higher than the interest rate shown on the Mortgage/Deed of Trust Note. If interest were the only Finance Charge, then the interest rate and the APR would be the same. 3. Interest + Prepaid Finance Charge = Finance Charge. = APR and / or Amount of Loan; Prepaid Finance Charge = Amount Financed = APR.

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