THE ABC'S OF APR

After finding your dream home, the second-most important step just may be the financing. One key part of that financing is the annual percentage rate (APR). While you may know going into the deal what your area's prime interest rate is, you may not be exactly clear on your lender's APR.

The APR basically is the final rate the lender charges you annually on your loan. Considering there may be loan fees involved and points charged, the final rate usually doesn't exactly match the rate your lender quoted you originally.

For example, the interest rate for two lenders may be the same at 7 percent. However, one lender may charge higher loan fees and the second lender may charge discount points to ofset his lower loan fees .

When applying for a mortgage, you must receive information about the APR within three days after the lender receives your application. The APR can change before final settlement without being disclosed to you but by no more than 1/8 of a percent. Finally, any mortgage insurance you must purchase has to be included when calculating the APR.

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