Published on 02/15/19 by Muriel Palmgren


Comparing Mortgage Rates

A major concern when buying a house is getting the best mortgage rate so that your payments will be the lowest possible.  Even the government suggests shopping for the best rate.  But what do you compare – Interest Rates – APR?  What’s the difference between Interest Rates and APR?

The Interest Rate is the portion of a loan charged as interest and paid to the lender for the use of its money.  It is usually expressed as an annual percent of the remaining loan.  Different lenders will have similar but different rates.  Your credit history also affects your interest rate.

The Annual Percentage Rate (APR) is a more complete measure of the cost to you to borrow money and is also expressed as an annual percentage rate.  It includes the interest rate and other fees that the lender charges. So the APR is higher than the interest rate.

In the APR, there are fees that are fairly constant among lenders, such as fees for credit checks, for verification of IRS taxes, etc.  However, there are other fees that can vary greatly with each lender.

 What are the different fees in APR that you should compare?

(1)  Interest rate – This also depends on your credit history.

(2)  Lender fees – Also called origination fees, these pay the people who check your information and prepare your loan

(3)  Discount points – Not usually needed when interest rates are low. You are paying interest upfront.

(4)  Mortgage insurance rate – Usually between 0.5 and 1% of the loan value that is paid until you have 20% equity in your home.  This annual rate also depends on your credit score and the amount of your down payment.

Contact two or three lenders and ask each of the lenders what they charge for these four things to see who has the best rates.

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