What is the APR?

clarissacrz · Joined: 02 Oct 2008 Posts: 1 1.30 Dollars($)

whats a APR ?

elnoralittle · Posted: Thu Oct 02, 2008 10:32 am Post subject:

APR is a measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.
you can utilize this website to calculate your APR
http://www.mortgagefit.com/calculators/apr.html

charlesarmbruster · Posted: Thu Oct 02, 2008 11:01 am Post subject:

Right -- APR is the true measure of your cost. You can compare one lender's quote to another's by comparing the APR, since it includes the fees. This isn't always accurate, but it is the industry guideline.

brian1 · Posted: Thu Oct 02, 2008 11:13 am Post subject:

While I agree with the definition I dont know about all lenders using it (correctly) and it being a solid tool for the consumer. I have seen way too many GFE's done wrong which throws the APR calculation off.
It is intended to be a good tool however a lot of lenders use bait and switch tactics and do not show everything up front on the good faith to make their offer look better and in turn making the APR look better.
Hope that makes sense

smithsussane · Posted: Thu Oct 02, 2008 7:55 pm Post subject:

Hi clarissacrz

Welcome to the Forums!

APR can be defined as the cost of credit which is expressed as a yearly rate. It also includes the interest rate, points, broker fees, and certain other credit charges.

Feel free to ask if you have further queries.

Sussane

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.11 Dollars($)

This explains APR and how the calculation used to determine the rate:

To arrive at the Annual percentage rate closing fees are subtracted from the total loan amount and then that amount is calculated over the term to determine what the rate would be if there were no closing costs.

Just because the APR is lower it does not mean that there are lower closing costs. This could be because the interest rate is lower on one loan and higher on another. However, if both loans that you are comparing do have equal interest rates, then the lower APR loan would have lower costs.

The Truth in Lending that shows APR is a disclosure created by the Federal Govt to make it easier for you to compare loans. In my opinion, it just makes it more confusing. I'm all for clarity, I just don't think they have done a good job of creating disclosures that accomplish this.

I think the best way to compare is to look at what is imporant to you. Are you going to be in the home long term? short term? It is how the loan is structured to benefit you most. You won't really determine that by looking at just the APR.

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