MORTGAGE BASICS

Learn about Interest and APR and How they are different.

The Interest Rate has become the name of the game when it comes to shopping for a home loan. Calling a mortgage company and getting a quote, just doesn't get it. There are hundreds of programs with many options that will affect your decision.

Rates are based on the stock market and other financial indicators. These rates change daily. The changes are based on many different economic indicators in the financial markets. To obtain current interest rates, contact a Mortgage Specialist at 317-713-2930 or Toll-Free at 866-909-2930.

The APR (annual percentage rate) reflects the cost of you mortgage loan as a yearly rate. It incorporates the cost to obtain the loan, such as discount fees and loan origination fee and is higher than the interest rate because of all these fees. The interest rate is the actual note rate. After applying for a loan to purchase or refinance your home, the truth-in-lending law requires lenders to disclose the loan's APR within three business days.

The Following finance charges can be including in calculating the APR:

Origination	Tax Service
Discount Points	Inspection Fees
Private Mortgage	Pre-paid interest
Underwriting	Broker Fees

Discount points and origination fees (known as points), are usually the largest fees lenders charge, so they make the most difference in determining which product is better. For this comparison, don't worry about the miscellaneous fees, such as the appraisal, title and credit reports. These charges are much less significant than points.

Each point paid equals 1 percent of the loan amount. On a $100,000 loan, one point would cost you $1,000. The reason lenders charge discount points is to reduce the interest rate. The more points, the lower the rate, and vice versa. It may be beneficial to pay points to lower your interest rate.

Difference between 'locking in' an interest rate and/or 'floating'

If you are concerned that interest rates may rise during the processing your loan, you can "lock in" the current rate for a period of time, generally 15, 30 or 60 days. When you "lock in" to an interest rate, you are guaranteed that rate for that agreed upon length of time. The benefit is the security of knowing the interest rate is fixed if interest rates should increase.

If you are locked in and rates decrease, you will not usually get the benefit of the decrease in interest rates. If you choose to "float" or defer "locking in" an interest rate, your rate will fluctuate with the market and will be subject to both upward and downward trends in the market. The benefit to floating a rate is if the interest rates were to decrease, you would have the option of locking into a lower rate.