Defintion of APR

Home Mortgage Loan Learning Center

NOTE RATE VS ANNUAL PERCENTAGE RATE

Mortgage-Broker.gif

THE DIFFERENCE BETWEEN THE NOTE RATE & APR

The Annual Percentage Rates ( APR ) requirement of the federal government of all lenders gives the borrower the "true cost of the loan" means of comparing loans. The APR was designed as a method to show the borrower the actual amount of interest they were paying on monies received vs. monies borrowed.

The APR was designed to give you an "apples to apples" comparison of loans by looking at the amount of the loan minus all of the fees associated with the financing of the loan to give you the actual amount you receive vs. the amount you're expected to payback and puts it into an annual percentage rate or APR. The biggest drawback with the APR is how there are no real defining standards as to what fees have to be included as financing fees. What this means is although you know the APR is a good means to compare a loan's true cost, you're not entirely sure that the lender includes the same list of fees as financing fees for calculating the APR as the lender you are comparing.

A good method to compare APR's is to get a good faith estimate breakdown of all of the fees a lender is going to charge you and compare them side by side to the other lender's fees. You can use many of the free APR calculators out on the internet there to calculate the APR of each loan using the same costs per loan. Often if you look on your good faith estimate you can see which fees have been included in the APR calculations any fee listed as a PFC ( Pre-paid Finance Charge ) should be included in the APR calculations

Although every effort has been made to keep this information accurate, the information provided by the First Arkansas Financial website is provided for information purposes only. First Arkansas Financial makes no warranties or representations about the completeness or accuracy of the information provided in the content found in the First Arkansas Financial website. The information contained within may or may not apply to your specific situation, and it should not be construed as financial advice. Because financial requirements are continually changing, please consult a mortgage professional with any questions you may have. First Arkansas Financial Inc. is a mortgage broker that provides home loan financing services in the following states: Arkansas, Missouri and Texas.

●Home ●Learning Center ●Loan Center ●Services ●Ask Us ●About Us