How APR is calculated

Which fees count toward the APR on a fee sheet, how mortgage insurance is treated, and why the number sometimes stays blank.

The APR on a fee sheet is calculated the way Regulation Z defines it: the rate at which the borrower's whole payment stream, discounted back to the day of closing, equals what they actually receive after the finance charges come out.

In practice that means two things you can see on the screen. Fees that Regulation Z treats as finance charges are subtracted from the loan rather than added to it, and mortgage insurance is counted month by month for exactly as long as it is required — not as a lump sum.

The line under the APR field tells you both: how much of your fee total counted, and how many months of mortgage insurance went into it.

What counts toward APR

These are charges the lender imposes as a condition of the loan, so they raise the APR above the note rate:

• Underwriting fee
• Discount points
• Prepaid (per-diem) interest
• Upfront FHA mortgage insurance premium, whether financed or paid at closing
• VA funding fee, whether financed or paid at closing
• USDA upfront guarantee fee
• Wire transfer fee
• Courier fee
• Buydown funds

What does not

These are third-party or government charges the borrower would face either way, so they do not move the APR:

• Appraisal, credit report, and final inspection
• Lender's title insurance, title endorsements, and the closing protection letter
• Document preparation fee
• Closing / settlement fee
• Recording fees
• HOA dues and prepaid HOA assessments
• Homeowner's insurance, property taxes, and escrow deposits
• Seller credits, lender credits, and other credits

HOA dues never count toward APR, whether they are monthly dues, a prepaid assessment, or a transfer fee typed in as an additional closing cost. The association charges them to every owner; a cash buyer pays the same.

Additional closing costs

A write-in closing cost is free text, so LendrTech guesses from the name and then shows you the guess. Each write-in row carries a small chip reading Counts toward APR or Not in APR, with a dashed outline while it is still a guess. Click it to change it, and the chip stops guessing for that row from then on.

An origination, processing, broker, or tax-service fee is counted. An HOA fee, owner's title policy, survey, or home warranty is not. Anything unfamiliar is counted by default, because every excluded category already has its own field on the fee sheet.

Government program fees

On an FHA, VA or USDA loan the upfront government fee is derived from the loan details rather than typed, and it moves whenever the loan amount, LTV, term or down payment moves. All three are finance charges, so all three raise the APR.

FHA. The annual MIP rate comes from HUD's matrix and depends on the loan term, the base loan amount, and the LTV — not on credit score, which is why LendrTech fills it in for you rather than asking you to confirm it the way it does for conventional MI. The common case, a 30-year at 96.5% LTV under $726,200, is 0.55% for the life of the loan.

FHA loan amounts are whole dollars, so when the upfront premium is financed the cents can't go into the loan. LendrTech rounds the total loan amount down and shows the remainder as UFMIP paid in cash under the premium field — usually a few cents, collected at closing.

VA. The funding fee depends on the down payment, whether this is a first or subsequent use, and — on a refinance — which kind. Tick Exempt? and it goes to zero. On a refinance, pick the VA Refinance Type: a cash-out or rate/term refinance is 2.15% first use and 3.30% subsequent, while an IRRRL (streamline) is 0.50% either way. That is a several-thousand-dollar difference on a typical loan, so the field appears as soon as you tick Refinance on a VA loan.

USDA. The upfront guarantee fee is grossed up, not marked up: the 1% is of the final loan amount including the fee, so a $300,000 base becomes a $303,030.30 loan with a $3,030.30 fee — not $3,000. The 0.35% annual fee sits in the Other row of the payment summary and follows the total loan amount, and unlike conventional PMI it never falls off.

Mortgage insurance

Mortgage insurance is part of the payment for as long as the lender requires it, and that length depends on the program:

On a refinance the cancellation point is measured against the Estimated Value, not the Current Mortgage Payoff. Leave Estimated Value blank and there is no property value to measure against, so LendrTech assumes mortgage insurance runs for the full term — which raises the APR rather than lowering it. Fill in Estimated Value and the line under the APR will name the figure it used.

Temporary buydowns

When a fee sheet has a 2-1 or 3-2-1 buydown, the APR reflects both halves of it: the buydown funds are a finance charge paid at closing, and the reduced payments in the buydown years are part of the payment stream. Those two mostly cancel, so a buydown moves the APR very little — which is the correct answer, not a rounding artifact.

When the APR is blank

The APR needs a loan amount, an interest rate, and a loan term. Until all three are on the sheet, the field stays empty and the line underneath says what is missing. It is deliberately blank rather than showing a placeholder: an APR you could quote by accident is worse than no APR at all.

A note on what this is for

The APR here is an estimate to help a borrower compare options. It is not a Truth-in-Lending disclosure, and it is not the APR that will appear on the Loan Estimate your system of record produces.