If you are in the market for a mortgage it is important to understand what the Annual Percentage Rate means and what you need to know in order to find the best mortgage. Here are tips to help you shop smartly for your mortgage loan. Comparison shopping for a mortgage can be a difficult task. Mortgage lenders use one interest rate to calculate your monthly payment but advertise a different interest rate. What does it all mean anyhow? When you shop for a mortgage it is important to understand the difference in the two interest rates. Here is what you need to know. Annual Percentage Rate The Annual Percentage rate (APR) is calculated by factoring in interest charges and any other fees charged by mortgage lenders over the duration of the loan. APR is expressed as a yearly expense. This formula gives you a good (but not great) estimate of the cost of any given loan offer. Truth in Lending Legislation in the United States, The Truth in Lending Act, requires mortgage lenders to post the Annual Percentage Rates for all of their loan offers. This legislation is intended to protect borrowers form deceitful lending practices. APR is a Good Starting Point; However You will want to get the complete picture of all costs, including closing costs. Closing costs are listed on the Good Faith Estimate your lender is required to provide you after receiving your application. You will want to apply with more than one lender to get your hands on this Good Faith Estimate for all of the loan offers you are considering. You can learn more about finding the best mortgage loan and avoiding common mortgage mistakes by registering for a free mortgage guidebook. |
