Costs

APR

APR, or annual percentage rate, is the yearly cost of your loan including certain fees, not just the interest rate. Because it folds in some closing costs, the APR is usually a bit higher than your rate. It's meant to help you compare loan offers on a more apples-to-apples basis.

Your interest rate tells you the cost of borrowing the money itself, while APR tries to capture a broader yearly cost by adding in certain lender fees. That’s why APR usually looks a little higher. When you compare two loans, the rate drives your monthly payment math, and the APR helps you weigh the fees behind each offer.

One thing to watch: APR assumes you keep the loan for its full term, so if you plan to move or refinance early, it may overstate the real cost difference between two loans. Look at the rate, the fees, and the APR together rather than picking a loan on any single number.

Related terms

Discount Points

Discount points are an up-front fee you can pay to permanently lower your interest rate. One point usually costs 1% of your loan amount. Points may be worth it if you keep the loan long enough for the monthly savings to outweigh the cost, but not if you'll move or refinance soon.

Closing Costs

Closing costs are the fees you pay to finalize your home purchase, on top of your down payment. They include lender fees, title and escrow charges, an appraisal, and prepaid items like taxes and insurance. Closing costs commonly run roughly 2% to 5% of the purchase price, though it varies by location and loan.

Conventional Loan

A conventional loan is a mortgage that isn't backed by a government program like FHA or VA. It often needs solid credit, but it can allow down payments as low as 3% and lets you drop mortgage insurance once you build enough equity. It's the most common loan type for many buyers.

Last updated: June 5, 2026

This definition is educational and isn't an offer to lend or financial advice. Rates, programs, and guidelines may change without notice. All loans are subject to credit and property approval.

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