All About APR

If you are interested in purchasing a new home, you'll need to research your financing options.  One major part of financing is the annual percentage rate (APR).  As you enter into a deal, you will likely know your area's prime interest rate, but you also need to learn about the lender's APR. The APR is the final rate the lender charges you annually.  After adding on any loan fees that are involved and points that will be charged, the final rate will usually be higher than the prime interest rate.

 When applying for a mortgage, the lender must notify you about the APR within three days of receiving your application.  The APR may change before final settlement, but there are limits on how much it can change. So while shopping for a mortgage, make sure you know the annual percentage rate, as well as what you will have to pay for points, application fees and mortgage insurance. Being fully informed is the only way you will be able to make the best decision

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March 15 2010 - Fremont
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Realtors giving mortgage advice.......this should be banned on Zillow.

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March 15 2010
The APR is the final rate the lender charges you annually.

I like this part.
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March 15 2010
Well, it's about time somebody explained this.
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March 15 2010
I've never been a fan of APR. It's an imaginery number, that few people loan officers know how to calculate. I prefer to comparision shop the rate & fees (including points. It's simple to understand, and since escrow & title will be the same - all you need to do is focus on the rate and lender fees.
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March 15 2010
Being fully informed is the only way you will be able to make the best decision.

I agree.

Be sure to ask your real estate agent if they have an "admin fee" or "transaction fee" and to explain it; don't ever assume they'll just tell you; always ask. Also ask about any buyer rebate; many agents are giving them now.

same with home warranty; get one on your own by shopping online (if the seller isn't paying for it) and save money on the kickback they give the agent.
 
Hire your own home inspector; not one the agent recommends; that way they don't feel a need to "go soft" on the property in order to continue getting referrals from the agent.

plenty of good cheap title companies on line; no need to overpay for the agent's in house one; let the agent enhance his commission by selling more homes rather than through steering you to expensive services. Why should you pay for their "marketing agreement"?
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March 15 2010
Profile picture for blue screen died
And I thought someone was going to finally explain how so many quotes keep coming up with APR's that are less than the annual rate!  As they never get removed on Zillow, I guess it is acceptable for a loan officer to post any APR they want since they can put the fees in a different category to exclude them from the APR calculation.  But still, even with no fees, shouldn't the APR be the annual rate?  How can you get below the annual rate?  Compounding increases the APR for investments, so does one do negative compounding?  The banks pay interest on the interest when compounded daily, weekly, monthly, quarterly, or semi-annually...  Does that mean the banks will reduce interest on the interest when I pay interest and principal monthly?  What difference does it make since all mortgages are paid monthly?

PLEASE, where is the Realtor® that can post what formula they are using to get a lower APR than annual interest rate?  And where is their degree or license in finance?
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March 15 2010
Pasa -

Wheneve you see APR below the rate, it will indicate the loan product is ARM and not fixed.   On ARM products, the APR is calculated in part by using the fully indexed rate.   Since indexes are very low right now, fully indexed rates are also very low and the APR calculations are calculated on the assumption that at adjustment the rate will remain at the fully indexed rate for the remainder of the loan.

For the full calculation, you might call on AzRob, he enjoys that topic if my memory is correct.
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March 15 2010

The only instance where an APR is lower than the note rote is when your dealing with an ARM, and it's  misleading.  They take into consideration what the ARM will adjust to based on today's index + margin, and if the loan would adjust today, then yes it will go down. Will that happen in 5, 7 or 10 years? Hard to say, but I doubt it.

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March 15 2010
Using the APR to decide which lender is foolish...consider who calculates the APR and ask are they impartial?
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March 15 2010

Here is an in depth definition of APR.


Realtor Brian-

"APR is the final rate the lender charges you annually"

Looks like you need a follow up post on APR when an ARM is the loan of choice.

What about a follow up on a no closing costs mortgage as well?

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March 15 2010
Profile picture for blue screen died
"fully indexed rates are also very low and the APR calculations are calculated on the assumption that at adjustment the rate will remain at the fully indexed rate for the remainder of the loan." -

And they publish the fully indexed rate for the first year next to the APR, and the APR is lower???  Or they publish a discounted rate for the "full annual rate" next to the APR, and the APR is lower?

It still makes no sense I still say someone is lying, and thus the APR is useless.

Besides, on adjustable rates, the "guesses" of the loan officer is much worse than mine, and I'm better off doing my own calculations of expected monthly payments and total interest.
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March 15 2010
Profile picture for blue screen died
"Here is an in depth definition of APR."-

I still see no way for the APR to be less than the published initial annual rate, even for an adjustable loan with no fees.  And even if there are rules, it appears many loan officers are just putting in anything they want.

I won't trust any quote that has an APR published less than the initial annual rate.

And since Realtor Brian stated he would tell us "ALL about APR" on this discussion topic, I'm still waiting for a good explanation from a member of NAR (Since NAR is one of the national propaganda leaders for the decade).
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March 15 2010
 
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