What is the Annual Percentage Rate (APR) I am quoted?
A. The Annual Percentage Rate (APR) is the cost of consumer credit as a percentage spread out over the term of the loan. It includes any charges payable directly or indirectly by the borrower and imposed directly by the creditor as an incident to or a condition of the extension of credit. Charges that are included in the APR calculation should be indicated as Prepaid Finance Charges on the Good Faith Estimate you receive. Please note that certain items such as Mortgage Insurance Premiums effect the APR calculation directly. Points and other prepaid finance charges are factored into the APR to show the true yield on the loan, which is why the APR is often higher than your note rate. The APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs with their costs included and not just the interest rate. These are inclusive of all the “non-reoccurring” charges associated with providing the loan.
