What does “APR” stand for?
This stands for Annual Percentage Rate and reflects the annual cost of the mortgage, taking into account “points” and other credit costs. The APR can be used to compare the annual cost of different types of mortgage loans, but be careful. This topic coincides with “points”, as discussed above, and may be misleading if you are planning a short stay in your home.
APR is an interest rate on the Truth-In-Lending Disclosure which calculates with the lender’s closing costs in the rate over the term of the loan. It is not the interest rate that you will be paying. The purpose of this disclosure is to allow the consumer to shop one interest rate with each lender that includes the closing costs to simplify the shopping process. The higher the lender’s costs, the higher the APR. The lower the lender’s costs, the lower the APR. Disclosure is required under Federal Law through the Real Estate Settlement Procedures Act (RESPA).
