APR, or Annual Percentage Rate, is something you want to shop around for when comparing loan costs for your new home. When making this comparison, just make sure you are doing an exact comparison, meaning looking at like loan products and for the same amount. For instance, if you were looking at a 30-year loan for $150,000, then you would need to make sure all the loans being looked at are for 30 years and at $150,000.
You will find some variations in APR, which can make a huge difference. If you were to receive two rates, one at 7.35% and the other at 7.65%, obviously the lower number is the better APR long-term. However, before you dive in and settle on any loan, you also want to think about the upfront money that you would be required to pay. In this case, you might be required to pay two separate amounts based on the different interest
rates.
Another option for comparison-shopping is to look at like loans but this time, with different points and other related fees. Now, the scenario in this case would be again, looking at two loans of $150,000, each for 30 years. However, while you might secure the same interest rate of 7.35%, the upfront costs are different due to the number of points. Usually, the price difference is not significant but something to consider.
The APR is seen as a yearly rate with various factors involved. In most cases, the lower the APR the lower the loan cost but just be sure you make the right comparisons. Now, if you were looking to take out a home equity loan for college or debt consolidation, just know that the APR only takes into account the interest rate on the line of credit and nothing else. Most importantly, look for loans that meet your needs
but never forget about the role the APR plays in the equation.