How Is a Mortgage Interest Rate Different than APR
August 23, 2023
Interest Rate
The interest rate, often referred to as the "note rate" or "nominal rate," is the percentage of the loan amount that the lender charges you for borrowing the money. It determines the amount of interest you will pay on your mortgage loan each year. The interest rate does not include any additional fees or costs associated with the mortgage, such as closing costs, broker fees, origination fees, or points.
APR (Annual Percentage Rate)
The APR is a broader measure of the cost of borrowing for a mortgage, as it takes into account the interest rate as well as other costs associated with the loan. APR includes fees and charges such as points, origination fees, mortgage insurance, and certain closing costs. The APR is designed to provide borrowers with a more accurate picture of the true cost of the mortgage. Lenders are required by law to disclose the APR to borrowers, making it easier to compare the total cost of different mortgage offers.
It may be to a borrower's advantage to go with a slightly higher APR and avoid higher upfront fees. Some of this depends on the amount of time you plan to stay on your home. It pays to have a complete understanding of the FHA loan details, options, and costs before you begin the loan application process.
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FHA Loan Articles
April 11, 2021With the trend of falling interest rates since 2019, the number of mortgage refinances around the country has spiked and continues to rise. Borrowers with FHA loans can also capitalize on the low rates, but it may be possible to simplify the process with the FHA Streamline Refinance.
April 3, 2021Borrowers can choose to refinance for several reasons, but it comes down to prioritizing different benefits. One homeowner may want the lowest possible monthly payment, while another might want the shortest possible term for their loan.
March 29, 2021The FHA helps first-time and low-income homebuyers by having lower down payment requirements for its borrowers. Despite this lower credit eligibility criteria set by FHA, it is important to remember that FHA-approved lenders can set their own requirements
March 24, 2021One of the major arguments people have for renting instead of buying is the large upfront cost of a down payment. Depending on the type of loan program you apply and are approved for, this could mean anything between 3.5% and 20% percent of your purchase price.
March 21, 2021The two basic types of home loans are fixed rate and adjustable-rate mortgages. The mortgage market offers many other options to homebuyers, but these two are the most common, and the first pair from which to pick.
