According to the Truth in Lending Act, which of the following fees is included in the calculation of the annual percentage rate?

The annual percentage rate (APR) is designed to give borrowers a clearer understanding of the total cost of borrowing by including not just the interest rate but also certain finance charges that are associated with the loan. Under the Truth in Lending Act (TILA), the calculation of the APR includes fees that are considered to be finance charges.

Closing agent charges fall under this category because they are directly related to the closing of the loan and are necessary for the transaction to take place. These fees might include services provided by the closing agent, who coordinates the closing process and ensures that all necessary documents are signed and recorded properly. Since these charges affect the cost of financing and are considered necessary for the transaction, they are included in the APR calculation.

In contrast, title insurance, recording fees, and appraisal fees do not typically count as finance charges. Title insurance protects against potential title issues but does not directly impact the loan cost in terms of financing rates. Recording fees are associated with the government process of recording ownership and also do not constitute a finance charge. Appraisal fees are necessary for determining property value but are not considered part of the cost of borrowing, thus they are generally not included in the APR calculation.

Understanding these distinctions is crucial for grasping how APR is calculated