Understanding Your New Home Loan: What's an APR?By Emily Kerr
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You're shopping for a loan for your new home and there's so much to consider. There's the excitement of walking through new home models and figuring out where everything will go. There's the competition of beating out other buyers if you're looking at a house on the secondary market.
A Whole New WorldIf you're a first time home buyer looking to figure out the ins and outs of a new home loan, there's also a whole new world to figure out.
While you're comparing rates offered by various banks and lending institutions as you search for a lender for your new home loan, you also need to look at some of the terms and conditions of the loan, such as APR.
What's APR?APR is one of the terms used in dialogs with loan officers that's sometimes not quite explained. APR is an abbreviation for Annual Percentage Rate, which is a measurement used to compare the rates of different new home loans offered by different lenders. APR includes not only the interest rate for the loan but the closing fees. When you're looking for the lender with the best rates, APR gives you a better idea of the total cost of the mortgage (including closing fees and lender points) over the term of the loan.
While lenders must calculate APR for you using a standard formula set by federal law, and while lenders must by federal law disclose everything about your new home loan to you, lenders are still apt to want to present the best home mortgage loan rate they can, in the best light. APR is likely to make the numbers higher than the mortgage lender's stated new home loan rates because it takes into account all costs.
APR is just one way to compare rates for new home loans, but it's an important and useful measure when looking into rates for new home mortgages.
About the AuthorEmily Kerr is a freelance writer with over 425 articles in print. She writes about topics from home financing to home construction.
SourcesThe Mortgage Center Seattle Government Housing
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