Mortgage Basics 101 – Lesson 2
Is the Lowest Interest Rate the best deal for the educated borrower?
Are you just interest rate shopping for your mortgage? Sometimes the best rate isn’t the best deal for you in the long run. The interest rate is not the true cost of the mortgage. There are many layers of costs added into the pricing structure of your mortgage. Don’t just rate shop, become an educated buyer and understand the difference. Is it worth more to pay up front fees to get a better rate?
First thing to look for is the mortgage APR (Annual Percentage Rate). This was created by the Federal Truth-in-Lending Act, to create a uniform way of calculating the actual cost of your mortgage. This may sound confusing, but it is a simple way to compare different loans from different lenders. The APR is the note rate of your mortgage plus any additional costs of the loan spread out for the term of the loan. James B Nutter & Co. is proud to say we don’t charge unnecessary junk fees that cause the APR to increase.*
Here’s an example to make it clearer.
| Rate | James B. Nutter & Co. | Mega Bank I | Mega Bank II |
|---|---|---|---|
| Note Rate | 4.125% | 4.125% | 4.00% |
| APR | 4.190% | 4.345% | 4.266% |
If you were looking at just the note rate, Mega Bank II would be the best. However, this is not true. Notice Mega Bank II has a higher APR. This is an indication other junk fees are being financed into the loan.
Look at James B. Nutter & Co’s APR in the above example. It has the lowest APR. The reason is simple. Unlike the Mega Banks, there are no junk fees and additional costs financed into your loan or paid out of pocket. James B. Nutter And Company’s loan is the best option. The lowest APR is the best deal over the life of the loan.
Don’t get caught only interest rate shopping, become the educated borrower and look at your APR.
*Example of some junk fees which may cause the APR to increase include title search, escrow fees, processing fees, underwriting fees, and closing fees.
Additional Resources:
- About Preapprovals
- Mortgage Calculator
- Steps to Getting Preapproved
- Nutter’s Guide to Buying a House
- First-time Home Buyer’s Resource Center
- The Truth About Home Loans
- Compare All Home Loan Options
- Today’s Mortgage Rates
- Fixed Rates vs Adjustable Rates
- Blog: Finding a Real Estate Agent with Nutter
- Blog: How to Choose the Right Mortgage Lender
- Blog: Smart Home Buyers get Preapproved Before They Search
- Blog: The Importance of Working with a Mortgage Lender Who Services Their Own Loans
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