The actual understanding of which fees to include in the APR calculation, varies among banks, brokers and mortgage companies. That is why the APR in the real world is not really a useful comparison tool.
Warnings About Annual Percentage Rate Disclosures
To be totally accurate the Annual Percentage Rate can only be calculated based on your specific loan amount and the final closing statement. Any change to closing costs or loan amount affects the APR. Even if the lender fees are accurate, the APR can be impacted depending on the choice of title companies and escrow companies. Since all fees charged by independent companies vary and are not known until the closing, the APR will vary from both the initial APR disclosure and final APR sent out with loan documents. The higher the loan amount the LOWER the APR.
We do not recommend making a final decision on any lender based on the APR quoted to you by phone. It is a well-intentioned law but it is flawed and APR's on Truth In Lending Forms are often wrong. Most web sites offer one APR based on a sample loan amount. Unless your loan amount is exactly the same, your APR will be different than the number quoted. Associate Mortgage will provide a Good Faith Estimate and a Truth In Lending Disclosure including the APR for your requested loan amount and interest rate with no obligation to apply with us.
It is very easy to manipulate.
Some loan originators intentionally lower the APR to satisfy smart, but unsuspecting shoppers. If you are shopping for the best deal; ask for a list of all fees, rates, and points and ask for a written guarantee if it sounds unbelievable. Most lenders rates, fees, programs are very similar if the loans are based on Fannie Mae or Freddie Mac guidelines. Associate Mortgage's rates are often .250% to .750% lower than other quotes. The initial Truth-In-Lending estimate is often slightly different than the final APR. The better the estimate the more accurate the APR. The extreme examples are applying for the really low rate with 2.50 points or more, the APR can be as much as 1.125% above the note rate. On the other end, a rate at zero points is about one eighth of a percent higher than the note rate. If you take a higher interest rate with a rebate to you to get a no closing cost type loan, the APR is usually lower than the note rate.