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what's the difference between interest rate and apr and what's the basis of ratio?.

Profile picture for Rajn
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April 15 - San Francisco
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Profile picture for Greg Darlin
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Nate,
Good post.  APR is not the total driving factor especially when a lender hides lender fees on non APR lines, such as on line 1311 and claims they are unrelated to the lender's compensation!
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May 01
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Rajan,
Clay is right in that APR is not a perfect measure.  It is meant to help borrowers see the trade offs between interest rate and fees in an apples-to-apples manner, but there are limitations to it.  I just wrote a blog post about the differences between rate and APR on the Mortgages Unzipped blog on Zillow.  I recommend it as it provides an overview of the topic.
Thanks,
Nate
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May 01
Profile picture for peanutt5
Hi Clay,

Your answer brings up other important factors to consider when evaluating loans. Seems like this calculator would be a good one for borrowers to use to compare mortgage loans, yes, as it also takes into consideration how long one plans to live in the house (even though the loan may be for thirty years, most people do not stay in a house that long)?
http://www.getsmart.com/loan-resources/Mortgage-Calculators/Which-mortgage-is-right-for-you.aspx
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April 27
Profile picture for Georgia Loans
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The borrower should just focus on the rate and fees in the 800 section. If someone is comparing offers with the same terms like a 30 Yr Fxd and they have the same interest rate, then compare fees being paid in the 800 section like origination, discount, mortgage broker, lender fees. APR can be manipulated.

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April 27
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"Do not get annoyed by the APR. Just worry about you interest rate.  APR means nothing to you." Means nothing to him as an agent or as a borrower? If you're saying it means nothing to a borrower, can you really make a blanket statement such as that?
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April 27
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April 16
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You can have no closing costs and the APR be about 1 point higher than the note rate, in some cases.
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April 16
Profile picture for jonwoolner
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As stated below, the interest rate is the note rate (the actual rate you pay).

The APR is simply some of the closing costs added to the loan and then the taking into account the interest (payment) rate.

Not all closing costs are included in the APR.  Do not get annoyed by the APR. Just worry about you interest rate.  APR means nothing to you.
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April 16
You're an agent?  I'm sorry, I thought that was like required reading to get a salesperson license.

Interest rate = Note rate. The rate that's used to determine your monthly payments

APR = Effective rate factoring in the note rate plus closing costs over the life of the loan.
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April 15
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Google APR.
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April 15
 

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