A good interest rate can preserve tens of thousands of dollars for you. Besides interest rates, home mortgages consist of closing charges after the mortgage loan is signed. There are other charges such as appraisal fees, attorney charges, and broker's commissions. The APR can be very perplexing.
The APR was made to consider all these charges so one can compare various mortgage loan schedules. The idea was to have a price that would mirror the total charges of the mortgage loan including interest rates and closing charges. The Federal Truth in Lending law made it mandatory for the mortgage lender to state the APR when advertising their rate in newspapers and on-line.
The lenders don't use the same formula to calculate the APR although the APR was made to keep lenders from misleading borrowers by offering extremely low interest rates and inflating their charges. It isn't a very efficient way of comparing lender's offers.
The APR doesn't encompass all the charges on the mortgage loan. The customary charges (closing costs) in the formula calculation are discount points, origination points, interest that has been paid, underwriting fees, loan processing charges, document preparation charges, and private mortgage insurance.
The lenders don't commonly include escrow charges, attorney charges, and fees for title searches, notary, transfer, and appraisal in the amount of the APR.
Lots of mortgage loan websites have APR calculators to discover the differences between several mortgage loans. Or you can get quotes from various mortgage lenders on the equivalent programs with the same exact rates of interest. You then can differentiate the closing charges evaluated by each mortgage lender. The loan with the smallest amount in charges is the mortgage loan with the best deal.
When starting to look for a home mortgage loan, you need to understand the purpose and formula of calculation of the various Annual Percentage Rates. This will help in discovering the best loan that you can afford. You have to be sure the lenders include the same charges in their calculations to be sure the APR is the precise amount of the price of the mortgage loan. You can ask the mortgage lenders what the exact dollar amount you will pay in closing charges and interest.
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