The true cost of a home loan.
The Annual Percentage Rate (APR) is the truest cost of a home loan. The APR is a recalculation of a borrower’s effective mortgage interest rate that includes closing costs, as well as the interest borrowers will pay on the loan. These closing costs can include origination fees, points, escrow fees, and mortgage insurance.
The APR may be somewhat misleading on loans that require large mortgage insurance premiums, like FHA loans. APR quotes are required, however, to prevent lenders from quoting artificially low interest rates to attract business and then charging substantial fees to cover the cost of the low rates. Per the Truth in Lending Act, all mortgage lenders must disclose their APR.