Mortgages- What is the

When you are in the market for a mortgage, choosing between lenders can be overwhelming.  Lenders will make all sorts of claims in their advertising boasting of their low interest rate.  This rate determines the amount of the monthly payments, but is only one factor in the mortgage costs.

Comparing the Annual Percentage Rate (APR) among lenders is usually a better benchmark of the costs of the loan.   The APR is a requirement of the federal Truth in Lending Act to be reported to borrowers and it estimates the costs over the duration of the year.

APR takes into account the interest rate as well as points, origination fees, any mortgage insurance premium, home inspections, prepaid interest (if applicable) and other fees that are incurred in acquiring the mortgage loan.  Simply stated, the APR gives you an idea of how these costs affect you over the length of the loan.

Although some costs, such as the title insurance, are omitted from the APR calculation, the APR is a much better standard to use when analyzing different mortgages.

After you have applied for a mortgage you will receive a copy of the Federal Truth in Lending Disclosure form, detailing not only the interest rate used to determine your payments but the APR will be shown as well.

The APR is always higher than the Interest Rate due to the affect of the costs necessary for acquiring a mortgage loan.