How does APR work?
APR basically takes the base interest rates, calculates closing costs, and gives you a number. Technically, the lower the number, the better the deal. If two lender quote you the exact same (base) rate, the lender with the lower APR is supposed to be a better deal. If the lenders are playing fair, this works well in giving you accurate information.
PR basically takes the base interest rates, calculates closing costs, and gives you a number. Technically, the lower the number, the better the deal. If two lender quote you the exact same (base) rate, the lender with the lower APR is supposed to be a better deal. If the lenders are playing fair, this works well in giving you accurate information. If the two lenders are quoting different (base) rates, then the APR calculation is totally misleading. Furthermore, the APR calculation only keeps the monthly payment information the same. Instead of the mortgage amount, APR uses “amount financed.” This is the “amount financed” information on the Truth in Lending statement. Amount financed takes into consideration the fees that are lender imposed, such as application fees, points, commitment fees, and interim or per diem interest. So, amount financed is the mortgage amount less any lender fees, points, and interim interest. The more fees, the lower the amount financed. The monthly payment is
