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.
------------------------------
RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
FHA Loan Articles
January 22, 2025Consider this scenario: you've been in your home for five years or more and you've likely built up a significant amount of equity, and now you might be wondering how to put that equity to work for you. Whether you're dreaming of a major renovation, need to consolidate debt, or want to help a child with college tuition, you have options. Two choices are an FHA cash-out refinance and a home equity line of credit (HELOC).
January 20, 2025The FHA Streamline Refinance offers a refinance option for those who don't want to cash in on their property's equity but instead want a lower payment or interest rate or who need to get out of an adjustable-rate mortgage. This streamlined program, designed specifically for those already in an FHA-insured mortgage, simplifies the refinancing process with fewer requirements and faster approval times depending on the transaction.
January 16, 2025Want to buy a home and thinking about getting an FHA loan? FHA loans are a great way to make homeownership happen, especially if you're a first-time buyer or don't have perfect credit. But you might wonder, "Can I get more than one FHA loan?"
The short answer is, it's tricky. The FHA itself doesn't say no automatically to having more than one loan. But there's a caveat. FHA loans are about helping you buy a place to live in – your main home base. Because of this, and a few other things, getting multiple FHA loans isn't easy.
January 15, 2025Buying a condo with an FHA loan is an option some don’t consider initially, but it’s worth adding to your list of potential property types. FHA loans for condo units traditionally require condo projects to be on or added to the FHA-approved list. Still, changes in policy over the years allow borrowers to apply for FHA loans on condo units in projects not on the list on a case-by-case basis.
December 30, 2024When applying for an FHA loan, lenders will consider more than just your credit scores and history. They also look at other factors affecting your risk profile and the interest rate they offer you.
One factor is occupancy type. For FHA loans, this is straightforward because these loans require owner occupancy. Investment properties aren't eligible. While conventional loans may have different rates for primary residences, second homes, and investment properties, this isn't a concern with FHA loans.
