Term of the day: APR

APR, or annual percentage rate, is a term that is used in the mortgage industry to describe the true cost of credit. Essentially, the APR is the interest rate (e.g 6.0%) plus the closing costs, expressed as an interest rate. The closer the APR to the interest rate the better deal you are getting. For example one loan officer might quote you an interest rate of 6% with an APR of 6.26%. Another loan officer quotes you an interest rate of 6.125% with an APR of 6.18%. The second loan officer is offering you a better deal even though the 1st loan officer has a lower interest rate. The moral of the story is to always compare APR's and not interest rates when you are shopping for a home loan.