“APR” is a yearly rate that captures the total cost of the mortgage. It includes; Interest paid over the life of the loan, Mortgage Insurance (MI), Loan Origination Fees, Lender Funding Fees, etc.

The A.P.R. is a tool for comparing loans. The A.P.R. is designed to give you the “true cost of a loan” in the form of a yearly rate.

It’s like owning a car. Your payment may be $300 per month ( your interest rate ) but with gas, insurance, etc. the true cost of owning the car may be closer to $600 per month ( the APR ). That’s the difference between your rate and the APR.

It’s designed to make it easier to compare loans. But it can be confusing because in reality the A.P.R. includes some, but not all, of the costs that go in to a mortgage. So A.P.R.s can be different from lender to lender and loan to loan. So shopping home loans baised on just the APR is not a wise thing to do.