4 Reasons to Not Use APR When Comparison Shopping
April 25th, 2012
April 25th, 2012
With mortgage rates at all-time lows, are you thinking about refinancing your home?
If so, then it’s important to comparison shop, regardless of whether you’re looking for a conventional loan, FHA loan or some other type of loan. However, if you’re like most homeowners, you may not know how to comparison shop for a loan.
The one thing you definitely don’t want to do is to shop by Annual Percentage Rate or APR. APR is supposed to represent the annual credit cost, plus interest, broker fees, points, origination fee and mortgage insurance premiums owed. While it’s supposed to help you determine the “true cost” of financing a home over a 30-year period, it’s an artificial number calculated by a formula determined by the government. However, the real “true cost” for financing is determined by adding the loan amount, the interest paid over 30 years, and the closing costs.
The 4 reasons why you don’t want to APR as a comparison tool:
Since everyone’s situation is different, comparison shopping by choosing the lowest APR may not provide you with the best loan option. Next week we'll discuss the right way to comparison shop for a mortgage.
If you’re still confused about APR, contact a knowledgeable mortgage broker. We’ll be happy to explain how APR works, as well as take a look at your individual circumstances to help you find the right loan for your needs.
We provide our clients with exceptional service and integrity which has become our hallmark.