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
October 31, 2024When buying a home for the first time, it helps to know how long the process can take. How do you know if your appraisal report is delayed if you don’t know how long the FHA allows for the process to be completed? How long does it take to get from the final offer to closing day? A “typical” FHA loan process may take up to 45 days from start to finish. Several factors can influence this timeline.
October 30, 2024Just because an FHA loan is designed to be more lenient with FICO scores and require a lower down payment doesn’t mean the house you buy with that loan is less than ideal. Did you know that FHA loans have minimum property standards to ensure the home is safe and livable? Those standards require the home to have an “economic life” for the entire term of the loan so you can freely sell the property later on if you choose to do so.
October 29, 2024Buying a home with an FHA mortgage is a major life decision, and preparation is essential before you start house hunting or consider making an offer on a property.
How to get started? In the early stages, establishing your budget and how much work you need to do on your credit is key. But once you have gotten past the initial phase of that planning you’ll want to consider the house itself and what you want from it.
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
October 24, 2024Buying your first home is a major milestone. If you use an FHA mortgage to buy your home, you’ll have two types of insurance to consider. One type is the FHA-required mortgage insurance premium, which is paid for 11 years or the loan's lifetime, depending on your down payment, loan term, and other variables.
