Many borrowers are confused by the additional costs that are associated with mortgage loans.  Federal law requires mortgage companies to disclose the loan's annual percentage rate (APR) in writing. The APR adds in the "other" costs of borrowing money.  Unfortunately, these costs are not calculated exactly the same way by all mortgage companies.  In general, the APR spreads out the up-front costs of points (if any), origination fees, pre-paid interest and application fees over the entire loan term.  This produces the "effective annual percentage rate", also known as the APR. Although it can be useful to compare the APR of different loan packages, it is much more effective to compare all the costs associated with the different loans. The APR can be manipulated by unscrupulous companies to appear lower than it actually is. Use the APR as a general guide, but make sure to review all of the costs with a qualified mortgage professional before making a final decision.