The Real Deal on Interest Rates

Navigating the mortgage process can be quite difficult, especially for first time home buyers. Interest rates can be especially tricky because there are many options available and they can change rapidly

The Annual Percentage Rate (APR) is a much better indicator to determine the total cost of a loan than the basic interest rate. The APR includes additional fees that basic rates often ignore. It's good practice to expect that the APR percentage is usually slightly higher than the standard rate.   When discussing your mortgage options with your Loan Officer, be aware paying for some or all of your closing cost items when you buy your home can reduce your interest rate and therefore your monthly mortgage payment.

Discount points and origination points are different. One discount point equals a single percentage of the principle balance of the loan. Paying discount points upfront will reduce your interest rate and they are generally tax deductible; to be safe you should always check with your CPA. Origination points are still one percent of the principle loan amount but they cannot be used to buy down the interest rate or monthly payment.

Interest rates vary depending on the percentage associated with the loan product and the length of the loan. Interest rates associated with adjustable rate mortgages can change periodically to reflect the cost of money, while loans with a fixed rate do not change for the life of the loan- unless you choose to refinance. First time home buyers should take extreme caution during their first home purchase and make sure they choose an experienced, reputable lender they can trust.