Posted by ReneeK/MI on March 24, 2009, 4:32 pm, in reply to "Re: Keep going, Renee!"
68.43.29.109
The APR is only good when comparing apples TO apples - useless to use to compare different loan products....also, it is an annual rate, but based on the interest over the entire life of the loan (not just the first seven years). That's why it's useless to use it to compare a 30-yr product with a 15-yr product (for example).
But other than THAT ...
--Previous Message--
: Since working at a bank, I was required
: to explain the difference when signing
: our own documents.... I break it down
: like this.
:
: I point to the APR, and say... this is
: not your loan rate, I will come back
: to this number... but don't worry
: about it. I then go through the
: remainder of the TIL, and have the
: mortgage flagged to show them the
: actual rate.
:
: I then explain the difference. The
: fed goverment created this number to
: allow you to shop different loans and
: enable you to compare apples to
: oranges, to pears. It's hard to
: understand the differences between
: rates on Fixed, adjustable, balloon
: loans ect. They assume the average
: person stays in a house 7 years. They
: require the lender to spread your
: costs over those 7 years, and
: represent those costs along with your
: actual rate over a 7 yrs period.
: While not perfect it allows you to
: compare the different loan products on
: the market to each other in some sort
: of equal footing.
:
: Not only does this alleviate their
: concerns... but they love the non
: technical explanation when their loan
: officers said they didn't have a clue
: what it meant except (don't worry
: about it.... which only puts them on
: the edge even more)
:
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