What is the APR?

APR is the ANNUAL PERCENTAGE RATE. The APR is different from the note rate ( interest rate ). The APR includes some of the costs into the interest rate. The Federal Truth in Lending law states that all mortgage companies are required to disclose the APR with the interest rate. The APR does not affect your monthly payments because the monthly payments are calculated with the interest rate and the length of the loan.

In some cases why is the APR lower than the interest rate?

The APR usually should be higher than the interest rate because the APR is the costs included into the interest rate. But on adjustable and balloon loans, the future rate is unknown and for this reason, the interest rate is estimated.

Why is there a prepayment penalty?

Most loans are sold on the secondary market, the mortgage company only services the loan. The investors need assurance that they can retain the margins they need on each of their loans for lending their money.

Why should I take an adjustable rate if my credit scores are sub-prime?

When you have sub-prime credit scores, there is no reason to lock yourself into a high fixed rate for 30 years. Adjustable programs are not designed to keep for the entire duration of the loan. There is a fixed portion of the loan in its maturity stage. This is where you can take advantage of the discounted rate and also try to improve your credit during this time. When the fixed stage is over and the interest rate becomes adjustable, you should look into refinancing the loan, considering that your credit has improved.

How long are interest rates good for?

Interest rates on prime products are locked in when the lender commits your loan. Once the lender locks in your rate, the rate is guaranteed until the expiration date. Locks can be set for 30, 45, or 60 days. A longer the lock period will cost the borrower more. This is why the borrower should be quick to help the loan officer process the loan. It will save you more money at the end. If a lock is about to expire, you can also extend it by paying a fraction of a point.

How long does a loan take?

The average loan takes anywhere from 2-4 weeks. Depending on the loan program and the mortgage lender’s procedures, it will determine the turnaround time. The more you help out the loan officer and respond quickly to their needs, they will push your file to closing. If you want a fast turnaround, be sure to provide your loan officer with all the needed documents upfront and another key is to get the appraisal done as soon as possible. An appraisal report will take on average about 5 working days.