What is APR!???

Question

Let's say I'm selling someone a refinance loan for their home. I get them 6.5% 30-year fixed rate mortgage, but the APR on the GFE says 6.875%. Why is this? Should people base the ACTUAL rate they are getting on the APR or the rate they see on the 1003?

Answer 1

APR is the following definition;
The APR is the measure of the cost of credit, expressed as a nominal yearly rate. It relates to the amount and timing of value received by the consumer to the amount and timing of payments made. The disclosure of the APR is central to the uniform credit cost disclosure envisioned by the Truth In Lending Act. What most real estate agents tell their clients is that it is the fully indexed rate of their loan. As a realtor I can say that also as one person here did, as a lender I have to explain it differently. In your example it looks like your using a 1.5% origination fee.

Answer 2

When the APR is figured, the closing costs are included in the financed amount. The government does not recognize closing costs and wants all figures in one. Therefor, when you work it backwards and add the closing costs into the final total to be financed, in order to make the payment come out the same, the APR must be raised. This satisfies the HUD statement, nothing else.

It's complicated, I hope you understand what I just said in laymen's terms. The actual interest you will be paying is the interest on the mortgage note that you will sign. Not to worry.

Answer 3

APR means Annual Percentage Rate. Now, consult a qualified lender, check out the information on Google, or ask a real estate agent.

Answer 4

Barbara hit the nail right on the head!