Once you have decided to start the home buying process, you know that getting a mortgage is going to be number one on the list of things to do. In doing this, you will come across two specific terms that many often get confused about when it comes to home loans. These terms are interest rates and APR.
Interest rates are simple to understand if you have purchased a loan, of any kind, previously. Interest is the amount that the lender will charge you for borrowing a certain amount of money. The interest rates can vary greatly depending on the lender in which the loan is purchased. Be sure to check around so you can find the lender who can offer you the best interest rate. Always read the fine print and ask about any fees or additional costs that you don't understand.
Another thing to understand about interest rates is that they can sometimes be lowered. Depending upon the lender, you can ask if making a larger down payment will help with reducing your interest. The same can be said for your monthly mortgage rate as well.
APR, or annual percentage rate, is a little bit different from interest rates. The APR amount will include the interest rate but will add on other items as well. Fees from points and mortgage insurance will also be added in with your APR. Every mortgage loan is a little different, so be sure to ask questions if you see a rate or fee that doesn't make sense to you.
These terms are especially good to know when you will have to read over a lot of paperwork that will involve them. Knowing the difference will help you to understand exactly what you will be paying when you make the choice to get a mortgage.
