Difference between APR and Interest Rate (loan officer, fixed rate, property tax, fees)

[MysteryMT]

I've been reading through some threads and I think I understand that the Interest Rate is usually lower than the actual APR after everything is considered.

But how much does that APR usually differ? Is there any sort of standard range? Like if I got a fixed rate of 5.000% would I expect an APR of 5.5 or 6? or should I anticipate a smaller change like 5.125 or even 5.25?

What would account for any big swings and is there a way to lessen or negotiate a lower APR?

Thanks.

[Fant]

APR is just what your interest rate would be if all your closing fees and points were rolled into the mortgage and you didnt have to pay them at closing. However different lendors include different fees so I think comparing APR is kind of useless. You are better off comparing actual interest rate, points, and closing fees and looking at the whole picture.

[jojo7]

Hmmm... I thought you couldn't roll your closing fees and points into the loan? Not the case?

[AndrewSoss]

Originally Posted by Fant

APR is just what your interest rate would be if all your closing fees and points were rolled into the mortgage and you didnt have to pay them at closing. However different lendors include different fees so I think comparing APR is kind of useless. You are better off comparing actual interest rate, points, and closing fees and looking at the whole picture.

There is a standard for what fees affect APR. They are any non-recurring fees that wouldn't otherwise be incurred if not for the proposed financing. Things like prorated property taxes, prorated interest, HOA, etc..wouldn't be included. If different lenders include different fees it's only because the Loan Officer is making a mistake.

[MysteryMT]

Thanks for your input, I've recently applied for a mortgage and was offered for an FHA loan 4.500% fixed over 30 years. The loan officer sent more specific documents and it shows an APR of 5.135% which seems like an awfully big jump. The 0.635% changes seems large, I had other mortgage broker's offering 5% and now I'm wondering if this is the best deal.

Also he gave me a GFE Monday with a loan origination fee of 650. The loan amount stayed the same and now he's increased it to $965.

I've got an appointment tomorrow to follow up with these changes, but jumping 315 dollars over two days is something I consider a major oversight since the loan amount didn't change.

Right now he has none of my money in hand so I have no problems walking, closing is five weeks out.

[AndrewSoss]

Originally Posted by MysteryMT

Thanks for your input, I've recently applied for a mortgage and was offered for an FHA loan 4.500% fixed over 30 years. The loan officer sent more specific documents and it shows an APR of 5.135% which seems like an awfully big jump. The 0.635% changes seems large, I had other mortgage broker's offering 5% and now I'm wondering if this is the best deal.

Also he gave me a GFE Monday with a loan origination fee of 650. The loan amount stayed the same and now he's increased it to $965.

I've got an appointment tomorrow to follow up with these changes, but jumping 315 dollars over two days is something I consider a major oversight since the loan amount didn't change.

Right now he has none of my money in hand so I have no problems walking, closing is five weeks out.

The spread between APR and Rate on FHA is almost always going to be relatively higher because of the Upfront MIP (1.75% fee that is on every FHA loan).

If your rate is not locked in, you are subject to changing fee structures (4.5% is a cost to the broker right now, so technically, the change should be in the buydown points to the lender, not the origination fee to the broker)

[Paul-Jerome]

Originally Posted by AndrewSoss

There is a standard for what fees affect APR. They are any non-recurring fees that wouldn't otherwise be incurred if not for the proposed financing. Things like prorated property taxes, prorated interest, HOA, etc..wouldn't be included. If different lenders include different fees it's only because the Loan Officer is making a mistake.

Property taxes and HOA are not considered finance charges and do not affect APR and are not included in the total finance charges.

Prorated interest is considered a prepaid finance charge and will always be included in the finance charges.

[NVA Mortgage Corporation]

Easy Way To Determine APR

There is a simple way to calculate the Annual Percentage Rate that I discovered when I first started out as a Loan Officer, because I did not have a software program to calculate it for me at the time- (I did not even have a computer or fax).

The annual percentage rate is not as complex as some think.

The purpose of APR is to bring clarity through disclosure, not confusion.
There is a way to figure out the problem of APR by using the Newton Raphson Method,
but there is a much easier way.

The APR is simply a vehicle through which the lender is required, by the federal
government, to translate costs associated with a given loan being considered..FOR EXAMPLE:

If the amount that you are borrowing is $100,000.00 @6.00% for 30 years, you will
have a payment of $599.55 P+I every month for 360 months.
If $3,000.00 within this loan amount is for the purpose of prepaid finance charges (fees) associated with origination, then your net loan amount is actually $97,000.00
At $97,000.00 loan amount (if you are using a rate of 6%), you would naturally calculate a lesser payment because of the reduced loan amount.

All you have to do to figure out the APR, is figure out what % rate you would need
to obtain that same payment of $599.55 at a loan amount of $97,000.00.

The rate you would need would be 6.2865% to produce this payment. (example).
This is your APR.

All it takes is a calculator and a little patience to narrow it down.
At this point, you are armed with the knowledge you need to determine the closing
costs on your mortgage quote accurately.

[eric#1]

Originally Posted by NVA Mortgage Corporation

Easy Way To Determine APR

There is a simple way to calculate the Annual Percentage Rate that I discovered when I first started out as a Loan Officer, because I did not have a software program to calculate it for me at the time- (I did not even have a computer or fax).

Old people are smart.
I like the new person.

[eric#1]

Hey wait a second I checked your profile - they've had faxes since 1998 when you got into the business. Sorry I assumed you operated without the tech stuff cause it wasn't around. Anyway good post with good info.