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Breaking down what goes into an APR

An annual percentage rate (APR) is more than just an interest rate, it also includes other annual costs associated with a loan and shows home buyers the “true” cost of a loan, which prevents lenders from advertising a low rate and hiding fees.

If you’re comparing lenders, and one has a vastly higher APR for the same interest rate, that could mean they are charging you more for the loan.

Most loans will have fees associated with points, processing, underwriting, document preparation, interest and escrow fees. However, there are other fees that aren't usually included in an APR, such as title or abstract fees, borrower attorney fees, home-inspection fees, recording fees and appraisal fees. Also, it should be noted that although taxes are considered part of closing costs, they aren't a lender fee so they don't count toward the APR.

A good way to figure out if you’re paying too much in fees is to ask multiple lenders to provide you with a good-faith estimate of their costs on the same type of loan program, at the same interest rate. If you delete the fees that are independent of the loan, such as homeowner’s insurance, title fees, escrow fees, attorney fees, etc., and add up all the loan fees, you’ll be able to compare apples to apples.

Ultimately, to get the best deal on a home loan, you'll want to take a look at multiple factors. You’ll want to consider the interest rate and compare lenders’ APRs. Look for any details included, or more importantly, not included in the estimates they provide. You’ll also want to check online reviews to make sure you are going to get a good customer service experience.

At Premier Mortgage Resources (PMR), we are determined to provide the best mortgage programs available and offer the best customer experience. Our philosophy is centered on operational excellence. This means providing the right program for each of our customers, and providing timely and accurate service levels.

We have hard-working, knowledgeable loan officers who are ready to answer all of your questions about our loan programs, fees, APR and interest rates. We operate in a transparent system with underwriters who make themselves available to help loan officers work through even the most complex transactions.

If you would like more information about qualifying for a mortgage, contact PMR today. Our loan officers can help you determine which loan program might be best for your particular set of circumstances.