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Briefly explain how you can use APR to find the best loan.

by fazerain772 from Allen, Texas. Mar 3rd 2016 Reply


Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,553 contributions

I generally DO NOT ADVISE using APR to find the best loan. A lender can easily confuse you. For example. I can quote you a super low APR by giving you a rate that required a bunch of discount points to buy to achieve. DO you want to pay all those points? Probably not, but you got the lower APR. This is a common trick of rate quote and online sites. Another is lender credits versus interest rate. Maybe you have little cash, and want a loan with lower costs. Your APR will be higher, but does this make it a bad loan? No. Talk with a local mortgage broker in your area for more details. For loans in MN, WI, and SD, visit me at www.JoeMetzler.com

Mar 3rd 2016
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Jesse Stroup (jessestroup)
#198 ranked lender in California - 591 contributions

The APR states the totle fees. The lower the APR the lower the fees, ask the bankers and brokers the APR before moving forward with your deal.

Mar 3rd 2016
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,000 contributions

APR is a twisted government calculation that has no "real world" common sense. APR is the worst indicator to determine if your loan is a good one or a bad one.. The reason I say this is because the rules are different when you shop brokers vs. mortgage banks... You could have two side by side identical loans, one from a broker and one from the bank, and the APR will be higher every time with the broker.. It's not that the brokers deal is worse, it's because the laws favor the banks over the brokers.. The best thing to compare is the note's interest rate and the fees associated with that rate. That's the only way to tell for sure if one deal is better than the other.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Mar 3rd 2016
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Larry Gray (lgray_312_247)
#565 ranked lender in California - 1,127 contributions

If you are a bit confused by the variety of answers from experienced professionals thus far, it is understandable because how APR is derived at and how to use for comparing can be confusing. The FEDs wanted a way for comparing lenders costsfor a particular rate to be shown as a rate. If you received 3.5% as a mortgage rate, calculating the mortgage loan amount by anyone will come out to the same payment each time. That is etched in stone. The APR is a hypothetical rate derived at by certain procedure of steps and one expects a lower costing loan @ a 3.5% rate to have the lower APR and the higher costing loan to have the higher APR. If everyone calculated the APR correctly all the time it might be a fair comparison! However, when you get an actual good faith estimate after being qualified by 2 or 3 lenders, you can see the costs for everything to compare. Then, and only then might you be able to compare one APR with other. Usually, when the APR is substantially higher than the rate you are paying too much in the loan. If you have the funding fee added into a VA or FHA loan then the APR tends to be much higherthan the rate, which is normal for FHA and VA. That added cost should be included in calculating the APR. Look at both the rate and APR but do not expect accuracy until you get a legitimate good faith estimate with all the loan costs included as well as rate. Then, you see all the costs at the same rate to compare with another anyway!

Mar 3rd 2016
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Brad Cahoone (info@globalhomefinance.com)
#92 ranked lender in Texas - 1,041 contributions

Hello the APR is actually an expression of the annual cost of the loan. You take the costs plus the interest over the life of the loan and divide by the number of years to arrive at the APR. It shows the cost as an Annual percentage and will reflect the cheapest cost per a year as an average over the life of the loan. It is not the sole determination in deciding which product is right for you. For example a no cost may have a higher APR than a loan with points, but if you are only keeping the loan for 2 years it may be a better loan for your situation. I am a mortgage banker in Lewisville, TX if you are in need of any further information. Thank you for asking questions and my contact information is Brad Cahoone NMLS ID: 184176 - Global Home Finance Inc. NMLS ID: 316441 - 972-724-3222 ext. 227 - bcahoone@globalhomefinanceinc.com

Apr 13th 2016
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