NOTE RATE VS APR RATE

[WKYLE]

I wanted to know what the difference between the note rate and APR rate on the  truth-in-lending disclosure.  I'm currently in the process of refinancing my ARM and my lender has my note rate locked at 6.0%FHA and on the truth-in-lending it has 6.6%.  Also, the GFE has the PMI/MIP,funding fee at $2,386.13.  Please someone explain this to me.  I'm the one that has the ARM getting ready to change post for details of my current loan.

[Anonymous]

I'm sure an expert will chime in, but I'm pretty sure the "note rate" is the raw annual percent interest for the loan, and the APR takes into account fees and compounding to express your total annual cost for the loan. To show the effect of compounding, consider the interest that WaMu is currently offering for their on-line savings. They say the rate is 3.93%, and the APR is 4%. The interest is compounded monthly, so each month you earn 3.93%/12=0.3275% interest on your balance. Over the course of the year, you effectively get (100.3275%)^12 = 104%.

[WKYLE]

Thank you for your feedback

[DallasLoanGuy]

apr is a calculation that considers up front fees. theory is that you can compare to different offers by looking at only apr. not all lenders calculate it right, rendering it useless. upfront mip if standard on fha. it helps keep the rate low. if you dont like it, you can always apply for conventional.