Home Loan Rates
2 Types of Rates:
Interest Rate and Annual Percentage Rate. It’s important to understand the difference and what to look for when you’re financing a home.
Interest rate is the percentage or cost you pay to borrower money from a lender for a specific period of time.
Annual percentage rate (APR) includes the interest rate in addition to the fees and expenses related to securing your home loan that can be referred to as closing costs. Such fees may include discount points, title fees, prepaid interest, appraisal fees, lender fees, etc.
The primary difference between interest rate and APR is that the interest rate reflects how much it will cost you to pay each year to borrow the money. The APR is a broader measure of the total cost to borrow the money for your home loan.
By law, a lender is required to disclose the APR when quoting an interest rate. Tip: the smaller the difference between the interest rate and APR, the less it will cost you overall to secure that home loan.
For example: If your interest rate is 5.5% and your APR is 5.75%, then that indicates that you’re only paying .25% of the loan amount in fees to secure the home loan. Whereas if your interest rate is 5.25% and your APR is 6.5%, then that indicates that you’re paying substantially more to secure your home loan because the difference is 1.25% instead of .25%.
What Is My Interest Rate?
Interest rates are available based on a number of variables such as:
Type of home loan, i.e. Conventional, FHA, VA, refinance
Length of loan, i.e. 15-year, 20-year, 25-year, 30-year
Your credit score (the higher your credit score, the better interest rate)
Market conditions, indicators such as Treasury yield, Jobs market
Get your rate: Start your Home Loan quote online
More information regarding rates, how they work and how to forecast if they will go up or down, click here.
Timing of when to lock in your interest rate is critical. This means finding a lender who understands your goals is essential to helping you meet and exceed your expectations. There are lenders who may advertise rates that are unbelievably lower than the standard rates available, but there will very likely be a catch.
Contact your trusted lender to ensure that there will be no hidden fees or locking expenses, so that you can receive the service and trust that you deserve.
First-time homebuyer? Check out our next section for more info about buying your first home.
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