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Can I get both my APR and interest rate fixed on an FHA loan? |
Thanks for your answers, folks. I've really been a confused loan shopper.^^ You've gotten some good answers. Let me take it down one more notch, though... Suppose you are borrowing $10,000 from me with a simple interest rate of 5%. You are borrowing the money for two years. The total amount of interest you will pay is $1,000. (Keeping it simple.) But suppose you need to also pay me a fee of $200 at the beginning of the loan. What the APR does is looks at the total amount you are paying me - $1,200 - and telling you what interest rate that represents over the life of the loan. Well, it's the equivalent of $600 a year, which would be 6% a year. The interest rate is 5%, but the APR is 6%. In theory, this allows me to compare two different loan offers. If someone else was willing to charge you 5.5% with no fee, the APR on that loan would be 5.5% and it would appear to be the better offer. APR assumes you are paying the loan for the full term. So be careful. If a loan carries high fees, it might carry the lower APR but still not be the best loan. If the APR assumes you are keeping the loan for 30 years, but you're only going to keep the home for 5 years, then the APR is wrong. For example, in the example above, if you kept my loan for only one year, you would pay the 5% interest, $500 and the $200 fee for a total of $700. The real APR would be 7%. So if you knew you were really going to pay the loan back in one year, the 5.5% loan would be the better option! apr has nothing to do with. yes you can get a fixed interest rate FHA loan. your APR is just the effective interest rate including all the fees you pay at the closing. APR - means "annual percentage rate", which really has nothing to do with fixed or not. You are probably confused because sometimes you will see (for instance): interest rate 6.75%, APR of 7.12%. What they are having to disclose is that there are some costs associated with making the loan, that if amortized and added to the interest rate of 6.75 would in fact calculate out to a "real" interest rate of 7.12. this was done to prevent lenders from giving you a really low rate, but very high fees on a loan. it reflects your true cost of borrowing and allows a consumer to be more informed. Yes you can. Once you find a home and lock your interest rate both your interest rate and APR will be locked. The APR cannot be locked. It is a tool for you to shop for a loan, using just one number. The APR is your interest rate plus any financing costs you would incur (Fees not charged when paying cash) rolled into one number. You can lock your interest rate. However, the APR may change slightly as the fees are adjusted to the actual numbers during the process. |
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