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Old 06-03-2011, 11:58 AM
 
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As a first-time home buyer learning about the mortgages, I have a simple question to ask that I cannot seem to get an answer from anywhere online. What exactly is "Fees in APR"? I was doing a rate search on bankrate.com and that came up in the quotes. The range was pretty big among all the quotes.

Also does doing getting a pre-qualification involve a credit pull? Will this lower our scores? Also, are we bound to the specific lender that we do a pre-qual with?


Thanks.
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Old 06-03-2011, 07:00 PM
 
Location: The Triad (nc)
17,420 posts, read 23,253,598 times
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Mortgage Glossary

Quote:
Originally Posted by MortgageProfessor
APR The Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations.

It is a measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges by the lender. The charges covered by the APR also include mortgage insurance premiums, but not other payments to third parties, such as payments to title insurers or appraisers.

The APR is adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid in the future.

However, the APR is calculated on the assumption that the loan runs to term, and is therefore potentially deceptive for borrowers with short time horizons. Read Does the Annual Percentage Rate (APR) Help? Other articles about the APR are cited under Mandatory Mortgage Disclosure. For a summary of the differences between the APR and interest cost, see Annual Percentage Rate Versus Interest Cost.
clear as mud
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Old 06-09-2011, 09:48 PM
 
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I think (but am not certain) that points in APR vary if you are looking at paying interest points (percentages of interest of the whole loan) up front. Different lenders use different decimals of points (ie, .35, 1.35, vs 1.0, 2.0, and many varieties in between), so that's where you can get some difference. Paying points up front will get you a lower interest rate, but make sure you measure the rate of return on the upfront cost (for 1.75 points on mine it would save .5% on the overall interest rate but the savings would take 12 years out of my 15 year term to regain, so i opted out of paying points and went with the best 0 point rate).

Prequalification will most likely hit your credit score unless you say "i know my number is X, please dont run my credit until I chose to move forward" (and even then that might not work). Running mine reduced it by 5-10 points.

You do not need to use the lender you prequalify with (I used Quicken for my prequal because I wanted to get the prequal the same day to put in an offer) and got my mortgage from US Bank, who had more competitive interest rates (3.75% for 15 year fixed conventional vs. 4.25% from quicken). Both companies checked my credit, but unless you are right on the border of a rating level, it shouldn't matter a whole lot.
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Old 06-13-2011, 05:53 PM
 
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Pre-Approval is based on what you tell them. Get your credit score from all three. Then get your total debt and monthly paymets on those recurring debts and your 2 last paycheck stubs. They will tell you if you're pre-approved based on what you tell them. If you're ready to buy you can shop for around to find the best offer. If you go to 100 different mortgage companies within a certain amount of time (14 days or something) they will only be counted as 1 hard pull. Same goes for shopping for an auto loan.


Also, when you get your first offer with all the fees DO NOT GO WITH IT. Shop around and tell the next mortgage company you will email them your good faith estimate from XYZ and see if you can beat it. Keep doing this to get the best rate and lowest fees possible. If any of them only include the % rate and not the APR too, report them.

You are not tied to anyone when you seek pre-approval and good faith estimates.
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