APR not best gauge of mortgage costs

Consumers shopping for a mortgage are frequently confronted with having to make a choice between complex alternatives. For example, they can select a fixed-rate mortgage (FRM) on which the rate is fixed at 5 percent for 30 years, or an adjustable-rate mortgage (ARM) on which the rate of 4.375 percent holds only for five years, after which it changes with the market.

On both loans, furthermore, a lower rate is available if the borrower pays points, an upfront charge expressed as a percent of the loan amount. In addition, borrowers have to pay a variety of fixed-dollar fees to lenders, and other fees to third parties, such as title agents and appraisers.

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