What is APR And Is It Important?

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There is a lot of regulation around APR and home mortgages – anything with this much regulation must be important, right?  Lenders and loan officers spend a lot of time calculating, managing, and disclosing APR – it is a big part of everyday life in the lending industry.

Candidly, APR is confusing and hard to understand.  I have heard it called many things – average percentage rate, about percentage rate, approximate percentage rates…  For the record it is Annual Percentage Rate.  Let’s clear up some of the confusion.

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The Mortgage Reports – by Gina Pogol

What is APR and Why Is It Important?

APR (annual percentage rate) is  the interest rate plus the costs associated with the loan.  This mysterious number is intended to give an apples to apples comparison between two different loans.  Theoretically, if the consumer compares the APR of two loans, the loan with the lowest annual percentage rate is naturally the best loan for the consumer.  APR is designed to protect consumes from hidden costs, bait & switch, and deceptive marketing schemes which have been used in this industry.

Equity Prime - Michael NelsonHang On A Minute – Does APR Tell the Whole Story All Of The Time?

APR is certainly helpful and an important part of the lending process.  However, loans are complex and ultimately one number alone does not automatically find the best loan for a particular borrower. Check out the wonderful article I have attached with this post that details  APR – the good and the bad.  APR is a complex calculation with many variables. If these variables are not exactly the same between loans, the loans are not apples to apples comparisons.

Remember, the borrower must look at a refinance or purchase of a new home relative to their particular needs.  The borrower’s debt, savings, down payment, anticipated time in a home, family, etc all play an important part in selecting the right mortgage.  While APR is important, one number can’t take into account all the variations and nuances in the life of a borrower.

APR Michael NelsonEquity PrimeWe Need to Help Our Customers Understand Hard Concepts!

I have said this before and it is worth repeating – lenders (such as myself) and real estate agents must  educate clients on  appropriate real estate and lending options.  If you are a borrower – make sure you have the right professionals supporting your real estate needs.  The right professionals care about your needs and take the time to do the research required to recommend the correct products.

Please feel free to continue the dialogue – text, e-mail, or call anytime.  As always – Happy House Hunting!

Mike

Michael F Nelson
720.213.6260
mnelson@equityprime.com
@michaelfnelson2
NMLS: 1314188
Licensed in:

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