Which item is NOT included in the calculation that determines the annual percentage rate?

The correct response indicates that the title insurance premium is not included in the calculation of the annual percentage rate (APR). The APR is designed to provide borrowers with a comprehensive measure of the cost of borrowing over the life of the loan, incorporating interest rates and certain fees associated with the loan.

The APR calculation takes into account costs that are directly related to obtaining the loan, such as the lender's discount points, which reduce the interest rate, and the broker's origination fees, which pay for the services of the broker facilitating the loan. Additionally, any mortgage insurance premiums that are required as part of the loan process are also considered because they are ongoing costs associated with the loan's financing.

In contrast, the title insurance premium typically paid for the title insurance policy protects the lender or buyer against claims related to the title of the property, is not a recurring cost associated with the loan's ongoing payments, and therefore does not affect the overall cost of financing as understood through the APR metric. Consequently, the title insurance premium is excluded from the APR calculation, allowing borrowers to focus on the costs that truly pertain to the financing structure of the mortgage loan.