Finding the perfect home in New York City is a task in and of itself. But finding the right deal to finance it may be equally as challenging. Commercials abound with financial companies offering what they believe may be the best deal for consumers (or at least ways to find the best deal).
This is done by touting how much money can be saved every month with a particular loan or how attractive an interest rate or APR (annual percentage rate) may be.
If you are looking for a home, before you are seduced by an advertised APR, it is important to know what it is and what could be missing from that number. This post will briefly explain.
For the uninitiated, an APR is essentially the annual costs of financing a home. Thus, it consists of all the points, interest, origination fees, title costs and closing costs spread over the life of the loan so that consumers can have an accurate forecast of their monthly payment.
Generally speaking, the APR gives a good snapshot of the monthly payment, but APR advertisements may not always be accurate. This is because there is not standardization formula applicable to all APRs. As such, some lenders may choose to include all fees a borrower will be responsible for, while others pick and choose what to advertise to make the loan look attractive.
With that, if you are serious about pursuing a particular offer, it is helpful to look at a lender's Good Faith Estimate for a better representation of all the costs involved. If you have additional questions, an experienced real estate attorney can advise you.