The APR (Annual Percentage Rate) is the percentage cost of the credit for which you are obtaining on a yearly basis. The APR was designed by the federal government to reveal the true total cost of getting a loan. The APR includes the interest rate and other added costs such as points, origination fees, and mortgage insurance (if applicable). The APR was created so that you can compare credit costs. Please keep in mind that the APR is not the same as the note rate. The note rate is the rate with which your monthly mortgage payments are calculated. The APR will always be higher than the note rate because it includes other closing costs required by the lender/broker.

When looking at a Good Faith Estimate (GFE), items that are used to calculate the APR should be checked in the PFC (Paid Finance Charge) Box to the far right side of the Good Faith Estimate (GFE).

The APR rate is a tool to help measure the true cost of the loan versus the interest rate offered.

If you are taking out a true no closing cost loan, your interest rate should be identical to your APR.

APR isn't the best way to tell if you're getting a great deal or not. It takes into consideration things out of your control like prepaid interest, insurance, etc., which can really just depend on when you actually close your loan.

The APR that is disclosed on your Truth-in- Lending statement can easily be manipulated by a loan officer choosing not to include certain closing costs into the APR calculation. For this reason, the APR may vary from one lender to the next, even if the note rate and closing costs are identical.

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