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FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

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How Is a Mortgage Interest Rate Different than APR

How Is a Mortgage Interest Rate Different than APR
Mortgage APR (Annual Percentage Rate) and a loan's interest rate are two different things, although they are closely related. Understanding the difference is an important part of a borrower's analysis of the true cost of their mortgage. Here's how they differ:

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

When not to Consider Refinancing a Home

There are plenty of reasons to delay plans to refinance a home. One reason has made big headlines. When borrowers face higher interest rates than originally approved for, that is a good reason to wait to refinance.

How FHA Construction Loan Draw Disbursements Work

When you are approved for an FHA One-Time Close Construction loan, you get a single loan that pays for both the costs to build the house, and serves as the mortgage. One application, one approval process, and one closing date.

Mortgage Rate Predictions for 2024

In the last days of November 2023, mortgage loan rates flirted with the 8% range but have since backed away, showing small but continued improvement. What does this mean for house hunters considering their options to become homeowners soon?

Is It Cheaper to Buy a Home With an FHA Loan or to Rent?

In May 2023, USA Today published some facts and figures about the state of the housing market in America. If you are weighing your options for an FHA mortgage and trying to decide if it’s cheaper to buy or rent, your zip code may have a lot to do with the answers you get.

Why Do FHA Loans Have Borrowing Limits?

FHA loan limits serve as a crucial mechanism to balance financial sustainability, regional variations in housing costs, and the agency's mission to promote homeownership, particularly for those with limited financial resources.

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