Understanding APR

Getting into mortgage is really a daunting and confusing task especially for first time homebuyers. How would you know which numbers are for your best interest when you get to have quite a few different quotes for interest rates and mortgage lender fees?

Choosing The Right Loan Officer

Having a trustworthy loan officer on your team is very important. The right partner to bring in to your team is someone who will educate you about the whole picture. You need to be given the real score on how the mortgage interests and fees translate for you on the long run.

Do not make the mistake of asking mortgage lenders or banks to quote you on their 30-year fixed rates. These quotes from the different banks will mean nothing to you when its time to close. Rather than looking at the face value interest rate, you need to be looking at the annual percentage rate (APR) instead.

APR: Understanding Why It Matters

Looking at the APR helps you understand what you are really paying for when it comes to your mortgage quote. APR calculations take into consideration all of the fees associated with the loan in addition to mortgage interest rates. This in turn makes finding the best mortgage really easy.

However, it is important to take note that low APR does not necessarily mean that it’s the best deal. You should not trust the APR alone for an accurate understanding of a mortgage loans’ true cost.

There is no standard law that states which fees have to be included in an APR. Thus, allowing lenders to choose what goes into the calculation and what doesn’t. The calculation itself is based on a number of assumptions that often don’t hold true. You have to know how lenders are positioning their fees to avoid excessive charges on your closing costs.

Reflections and Decisions: Winning In Mortgage

While APR is a good starting point for narrowing down offers, you have to dig deeper and really understand the true cost of any loan before committing. Those costs start with the Good Faith Estimate (GFE), a list of all the fees that would be charged to provide you a home loan. Lenders are required to provide this information to you and it already includes the charges that would otherwise not be included in the APR. While only an estimate, the GFE will let you view all fees, item by item, and identify any instances of overcharging or hefty fees.

As one of the biggest purchases in your lifetime, you need to understand the total cost of the mortgage that you are taking. Scrutinize every detail and seek the guidance and assistance of a professional who really knows the business. It would be great to be told upfront the necessary information you need to make a sound decision.

Should you need any assistance, please feel free to enter your information below. We will help you learn everything you need to know about obtaining the best mortgage possible.

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