APR: A key factor to judge best lender

Sam

Annual Percentage Rate or APR is the cost of credit expressed as a yearly percentage rate. It is calculated by considering the interest and other loan fees. The value of APR helps to find out which lender is offering a better interest rate and term.

A number of fees are considered for calculating the APR. They are:

Discount points and origination fee
Prepaid interest
Loan processing fee
Underwriting fee
Document preparation fee
Private mortgage insurance

The value of APR depends on the principal loan amount, rate of interest, the additional cost and the number of months. So it is a function of four dependent variables. Using symbols it can be denoted as:

APR =f (P, I, A, N)
where, P = Principal loan amount
A = additional cost
I = interest rate
N = number of months

By the Truth in Lending Act, lenders should always disclose this rate to the borrower within 3 days of receiving the loan application.

The Law enacted by the Federal Reserve Board Regulation known as Regulation Z gives uniform methods for calculating the cost of credit, its disclosure requirements and procedures for solving the errors on some credit accounts. The APR is then calculated from the cost of credit thus obtained.

For Example, Suppose a loan amount of $50,000 having an additional cost of $200 and an interest rate of 10% is taken for 5 years (60 months). The APR here comes out to be 10.1725%.

Related Readings

Why is the APR on TIL disclosure higher than mortgage rate?

Calculate it yourself

APR (Annual Percentage Rate) Calculator

Bill · Posted: Wed Apr 12, 2006 1:23 pm Post subject:

Sam,

I appreciate your explanation of APR ... however, as a lender I take exception to suggesting to consumers that APR is beneficial tool when comparison shopping for a mortgage.

A loan with a lower APR is not necessarily based on a better rate and/or less fees.

The truth is that APR is a very poor way to comparison shop due to the fact that APR can be manipulated by lenders and can cause borrowers to make costly wrong decisions.

I personally suggest that each and every borrower comparison shopping for a mortgage simply obtain a Good Faith Estimate from competing lenders and compare the true note rate of interest along with the total fees charged against the competing offer. This is the REAL comparison you are looking for when shopping for a mortgage!

For more information from a lenders point of view, please consider sharing my own article located at: .http://statestreetmortgage.net/files/6/3/6320680979298068e592a570ad15 42f3/80217-apr-can-hurt-you.pdf

Hope this helps!

Guest 0.10 Dollars($)

Closing Fee Detail 130 - 30 Year Conforming Fixed 6.875 @ 1.375 Points
State: PA County: Lackawanna
Loan Amount: $66,300.00 LTV: 86.87%
Monthly Payment: $464.27

---------------------------------------------------------------------- ----------

800
ITEMS PAYABLE IN CONNECTION WITH LOAN
801 - Loan Origination Fee $0.00
802 - Loan Discount Fee $911.63
803 - Appraisal Fee $350.00
804 - Credit Report Fee $30.00
805 - Final Insp/Add'l Appraisal Fee $0.00
806 - QLSS Appraisal Mgmt $75.00
807 - Flood Life of Loan Coverage $5.00
808 - Flood Cert Fee $10.50
809 - Underwriting Fee $295.00
810 - Processing Fee $575.00
811 - Buydown Fee $0.00
900
ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
901 - Interest $0.00
902 - Mortgage Insurance Premium $0.00
903 - Hazard Insurance Premium $0.00
904 - Flood Insurance $0.00
1000
RESERVES DEPOSITED WITH LENDER
1100
TITLE CHARGES
1101 - Settlement or Closing Fee $325.00
1102 - Abstract or Title Search $0.00
1103 - Title Examination $0.00
1104 - Title Insurance Binder $0.00
1105 - Document Preparation Fee $0.00
1105b - Deed Preparation Fee $0.00
1106 - Notary Fees $0.00
1107 - Attorney's Fees $0.00
1108 - Title Insurance Premium $720.75
1109 - Lender's Coverage $0.00
1110 - Owner's Coverage $0.00
1111 - Insured Closing Letter Premium $35.00
1112 - EPA/Survey/Title $225.00
1113 - Tax Certification $100.00
1200
GOVERNMENT RECORDING & TRANSFER CHARGES
1201a - Recording Deed Fee 0.00
1201b - Recording Mortgage Fee 146.00
1201c - Recording Releases Fee 0.00
1202a - Cty/Cnty Deed tax/stamp 381.60
1202b - Cty/Cnty Mtg. tax/stamp 0.00
1203a - State Deed tax/stamp 381.60
1203b - State Mortgage tax/stamp 0.00
1204 - Assignment Fee 0.00
1205 - (Misc) Rec./Trans. Cost 0.00
1300
ADDITIONAL SETTLEMENT CHARGES
1301 - Survey 250.00
1302 - Pest Inspection 0.00
1303 - Subordination Agreement 0.00
1304 - Tax Related Service Fee 0.00
1305 - Document Preparation 0.00
1306 - Rock Insurance 0.00
1307 - Express Mail/Courier Fee 0.00
1308 - Debts to be paid(per addendum) 0.00
1309 - Tax Proration 0.00
1310 - Escrow Holdback 0.00
1311 - VOD/VOM/VOR 0.00

---------------------------------------------------------------------- ----------
Total Client Paid Fees $4,817.08

Estimated Closing Fee Details
This is an estimate of closing fees and also may not cover all items you could be required to pay at closing. Such items may include, but are not limited to, prepaid interest, hazard insurance and escrows. This is not meant to replace the Good Faith Estimate of Closing Costs which will be mailed to you within 3 business days of applying for a loan.

Mortgage Banker: Stephen Peters
Email:.stevepeters@quickenloans.com
Phone: (800) 226-6308 EXT: 57495

OK THIS IS A JOKE..LETS BREAK IT DOWN !
#802- I ACTUALLY HAVE TO PAY TO GET THIS CRAPPY RATE(HE DIDNT EVEN TELL ME I WAS PAYING THIS.I GOT A BETTER RATE VIA 2 OTHER LENDERS WITHOUT ANY POINTS OR DISCOUNT FEES AT ALL!!!!
#803- VALID AMOUNT IF HIS APPRAISER WAS NOT ON THE PAYROLL!!TRY TO PROVE TO ME THAT APPRAISER MAKES ANYWHERE NEAR $350 PER HR
#804- VALID........ASK FOR RECIEPT
#806- PURE JUNK FEE!!!!.....I HAVE TO PAY THE APPRAISER'S MANAGER TOO??LOLOL
#807- JUNK FEE!!
#808- VALID.....ASK FOR RECIEPT!!
#901- DELIBERATELY LEFT OUT OF TOTAL COSTS BUT NECESSARY.THIS WOULD BE ONE OF THOSE LAST MINUTE SURPRISES TO THOSE WHO DO NOT KNOW BETTER!!!
#902- DELIBERATELY LEFT OUT OF TOTAL COSTS BUT NECESSARY.THIS WOULD BE ONE OF THOSE LAST MINUTE SURPRISES TO THOSE WHO DO NOT KNOW BETTER!!!
#903- DELIBERATELY LEFT OUT OF TOTAL COSTS BUT NECESSARY.THIS WOULD BE ONE OF THOSE LAST MINUTE SURPRISES TO THOSE WHO DO NOT KNOW BETTER!!!
#1101- VALID UNLESS THE TITLE AGENT DOES THE CLOSING IN HIS OWN OFFICE.....THIS FEE IS SUPPOSED TO COVER THE MEETING PLACE AND THATS ALL.
#1102- DELIBERATELY LEFT OUT OF TOTAL COSTS BUT NECESSARY.THIS WOULD BE ONE OF THOSE LAST MINUTE SURPRISES TO THOSE WHO DO NOT KNOW BETTER!!!THIS SERVICE CAN RUN $150-$225.ASK IF TITLE AGENT HAS A GUY ON THE PAYROLL DOING THIS...IF NOT ASK FOR RECIEPT!!!
#1111- PURE JUNK FEE!!
#1112- VALID IF NEEDED...ASK FOR RECIEPT!!!
#1113- JUNK FEE!!!!
#1201B-IT NEVER COSTS THAT MUCH!!!ASK FOR RECIEPT!
#1301- VALID IF NEEDED...ASK FOR RECIEPT!!!

THERE IS AT LEAST 500 OR MORE IN JUNK FEES AND ABOUT 1500 IN FEES THAT WILL BE A SURPRISE AT CLOSING GUARRANTEED!!OH...AND THEY WILL SAY " WE ARE THE NUMBER 1 ONLINE LENDER" AT LEAST 15 TIMES BY THE TIME YOUR CONVERSATION IS FINISHED.....PROBABLY #1 AT SCREWING PEOPLE!!!

Guest 0.10 Dollars($)

Thanks for sharing the information. I also feel there are lots of junk fees included in the list you have provided.

All times are GMT - 7 Hours

Page 1 of 1