Origination points, an amount paid to the lender for making the loan, and discount points, an amount paid to lower the interest rate, are included in the APR. Other charges used to calculate the APR include private mortgage insurance, application fee, appraisal, loan document preparation, credit report, and a settlement or closing fee. In general, the APR calculation includes fees charged in connection with financing a home purchase or refinance.
Lenders add the total interest paid on the mortgage to settlement fees, then amortize the sum over the life of the loan. The APR that results reflects how much you pay each year to finance your home.