Ingrid B. Quinn

NMLS ID #211652 Arizona, Loan Consultant

APR vs. Interest Rate, What’s the Difference?

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Recently one of the Realtors I work closely with asked me what the actual difference between APR (annual percentage rate) and the Interest rate. Well, there is a big difference and when you are shopping for a home mortgage you are going to want to pay attention to a lot more than just the APR that is being offered by a lender. The short answer to this question is that simple interest is only the interest you pay on the loan whereas the APR is an informational number that covers some of costs of obtaining a residential loan, including points, interest, lender administration fees, mortgage insurance and various title fees.
In the case of a mortgage, the annual percentage rate, or APR, is the total yearly cost of financing a home, expressed as a percentage of the amount financed.
The federal Truth in Lending Act requires the lender to disclose both the nominal rate and the APR. Loans are frequently offered on different terms. Loan terms from different lenders can make it hard to figure out which offer is truly the best one.
The APR disclosed can be rounded up or down to the nearest one-eighth of a percentage point. Both the APR & simple interest rate must be advertised in the same font size or APR may be larger in print.
What this all means is that the APR of a loan is essentially a consumer tool designed to assist people when looking to make a major purchase. On the other hand, you have your simple interest rate. This is a very straight forward percentage that will be applied to your loan and determines your monthly payment.
People can use APR to get a general idea of what you will be looking at long term, but when it comes down to it people need to not be hesitant to ask lenders questions. Call them and find out what exactly their APR includes and what other fees are to be expected. You can also talk to your realtor and ask them about different lenders they have worked with. It’s never a bad thing to get a second opinion. Especially from a professional who is there to get you into your new home or assist you your refinance transaction.
For any questions or suggestions please feel free to email me at Ingrid.Quinn@CobaltMortage.com or visit me at http://www.CobaltMortgage.com/IngridQuinn or http://www.ScottsdaleMortgageExpert.com .

Author: ibquinn

I am a Senior Loan Officer at Caliber Home Loans, with over 32 years of Mortgage Banking experience. I have the expertise and knowledge to help focus in on your homeownership goals and make them into reality. My team of experienced mortgage professionals and I can assist you in all steps of the home buying process and ensure that you have a smooth and hassle-free transaction. Caliber cannot accept mortgage loan applications or inquiries for properties located in New York through this site. Ingrid Quinn NMLS #211652 BK#0923637 www.ScottdaleMortgageExpert.com

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