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Morgage APR: What is an Annual Percentage Rate?
The morgage apr (or 'Annual Percentage Rate') attempts to be an 'effective interest rate' by
taking a
comprehensive measure of credit/loan costs to the borrower. It considers factors such as
the interest rate, morgage points, lender fees, & escrow/title charges connected to the loan (as listed on your Good Faith Estimate or Settlement Statement).
It also considers the 'time value' of money, so that dollars paid by the
borrower early on in the loan (inluding loan costs) carry moe weight than dollars paid 10 or more years down the road. In this way it provides
an 'efective' interest rate that is a more accurate measure of the cost of borrowing money than the interest rate alone.
REMINDER: the APR
is calculated on the assumption that the loan runs to full term, so it is therefore potentially deceptive for
borrowers with short-term lending goals.
NOTE: The morgage apr MUST be reported by lenders/brokers in accordance with the 'Truth in Lending Act'.
Other Important Morgage Terms
Approval - Conditional loan approval based on information provided to the lender
and subject to the verification and/or receipt of additional information.
Once all closing conditions and lender requirements are satisfied, the loan will receive final approval.
Assessment - A local tax levied against properties for civil improvements such as road or sidewalk repair, new sewer lines, or street lights.
Assumability/Assumption
A feature of the loan which permits you to transfer your mortgage and its specified terms to the person(s) purchasing your home. Having an assumable loan could make it easier for you to sell your home, since assumption of a loan usually involves lower fees and/or qualifying standards for the new borrower than a new loan.
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Morgage APR - Find Out What Annual Percentage Rates Really Are...
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