Mortgage Loans : What is APR?

WHAT IS APR?

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a first yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the “true cost of a loan.” It creates a level playing field for lenders and prevents lenders from advertising a low rate and hiding fees. Most lenders advertise rates with one point origination buried into the rate.

Your monthly payments are strictly a function of the interest rate and the length of the loan.

Because different lenders calculate APRs differently, a loan with a lower APR is not exactly a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate, on the same day around the same time. Rates change sometimes several times a day. Then disregard the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Then add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

The following fees are generally included in the APR:
- Points – both discount points and origination points

I generally discourage borrowers from paying any more than a half a point. If you plan on staying in the property for at least five few years, paying a half a discount point to lower the loan’s interest rate can be a good way to lower your required monthly loan payment. If you only plan to stay in the property for a year or two, your monthly savings is not be enough to recoup the cost of the discount points that you pay in cash or finance up-front
- Pre-paid interest. The interest paid from the date the loan closes to the end of the month.

We lump our underwriting, processing, doc prep, DU or LP, flood, wire and others into a flat number of $1590.00. This makes it easier for a Borrower to compare the exact costs.
- Loan-processing fee
- Underwriting fee
- Document-preparation fee
- Private mortgage-insurance
- Tax service, flood certificate, wire transfers, email documents, all kinds of and a.. add a junk.

The following fees are sometimes included in the APR:
- Loan-application fee

The following fees are normally not included in the APR:
- Title or abstract fee
- Escrow fee
- Attorney fee
- Notary fee
- Document preparation (charged by the escrow or attorney agent)
- Home-inspection fees
- Recording fee
- Transfer taxes
- Credit report
- Appraisal fee

Please give me a bargain rate, a really cheap deal that I can trust

INTERESTING FACT: the APR on our 5 and 7 Year LIBOR loans the APR is lower than the actual rate. Call me and ask why??? (949) 637-8190 Caroline Gerardo

NMLS # 324982

7/22/13

S&P 500