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What is APR?
The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.
Because different lenders calculate APRs differently, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g., 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
Points - both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
Loan-processing fee
Underwriting fee
Document-preparation fee
Private mortgage-insurance
The following fees are sometimes included in the APR:
Loan-application fee
Credit life insurance (insurance that pays off the mortgage in the event of a borrower’s death)
The following fees are normally not included in the APR:
Title or abstract fee
Escrow fee
Attorney fee
Notary fee
Document preparation (charged by the closing agent)
Home-inspection fees
Recording fee
Transfer taxes
Credit report
Appraisal fee
For more than 25 years, Omega Financial has been serving mortgage clients in Massachusetts. Our brokers have approximately 50 years in the mortgage business. You always will receive fast, courteous, and accurate information. Omega Financial, Inc. is a company duly licensed to operate in Massachusetts as a Mortgage Brokerage. We are located in the Town of Norwood, Massachusetts where we have been operating as Omega Financial Incorporated since 1988. Licensed by the Commissioner of Banks - License No. MB2671