The Annual Percentage Rate (APR) is the cost of consumer credit as a percentage, spread out over the term of the loan. It includes any charges payable directly or indirectly by the consumer and imposed directly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction. Charges that are included in the APR calculation should be indicated as prepaid finance charges. If you would like to check Point's APR against the U.S. Controller of Currencies APR Software Program: APRWIN, click here. Also, please refer to article, 2823 Understanding the APR, for a more detailed description of APRs.
Prepaid Finance Charges
Verify that the PFC check box has been checked next to each APR fee on the Fees Worksheet and that the total has populated to the Truth-In-Lending form, beneath the payment schedule.
If the PFC check boxes are checked on the Fees Worksheet but they do not populate to the TIL:
- Go to the Fees Worksheet.
- Click the Borrower button next to each PFC item.
- When the Fee Distribution screen appear, simply click OK. This will force Point to re-calculate the PFC items.
- Follow steps 2 through 3 for all PFC items.
- Go to the Truth-In-Lending form and click the Calculate button at the bottom of the window to re-calculate the APR.
Mortgage insurance will also affect the APR. Verify that you have entered it correctly. Too many month's may have been completed in the Months field or the months section is completely blank, which means mortgage insurance will be calculated over the life term of the loan (not generally the case).
For FHA loans, the mortgage insurance will usually drop off at 78% of the loan balance. You should verify when the mortgage insurance will cancel and enter the Cancel at percentage.
Customized Payment Schedule: Verify that the Customize checkbox is NOT checked. The Do not extend loan term by 'Odd Days' checkbox will slightly adjust the APR by including the per diem interest into the APR calculation.
Adjustable Rate Mortgages (ARM)
Any adjustments in the payment schedule, such as an ARM or an interest only period will affect the APR. When doing an ARM, check that you have correctly entered the adjustments into the Rate Adjustment section.
Removing the index and clicking the Calculate button at the bottom of the window will assume worst case scenario, thus calculating a higher APR. Entering a margin and an index will assume best case scenario, thus calculating a lower APR.
Graduated Payment Mortgage
The Graduated Payment Mtg section should be blank. Verify that the Years and Rate fields are empty.
If your loan is a Construction loan, verify that the construction parameters are correct in the If Construction Loan section on Page 1 of the Loan Application