Barbee Dream Homes Real Estate Group, LLC
Joe L. Barbee - ABR, MRP ~ Jennifer F Barbee -Realtor
APR versus interest rate: What's the difference? If you’re applying for a mortgage, these are two financial terms you need to understand. APR stands for "annual percentage rate," or the amount of interest on your total loan that you'll pay annually over the life of the loan. It's slightly different from the interest rate, which is the cost you'll pay each day based on your mortgage balance.
These terms might be foreign to you, especially if this is your first time buying a home. But don’t worry—we’ll break down what each one is so that you’re ready to be a savvy mortgage shopper. Let's first start by discussing the mortgage interest rate.
What is a mortgage interest rate?
Simply put, the interest rate is the cost you will pay each day the borrowed money is owed, expressed as a percentage rate. In other words, “it does not reflect fees or any other charges you may have to pay for the loan,” says Staci Titsworth, regional manager of PNC Mortgage in Pittsburgh.
Interest is calculated as a per diem (per day) figure based on the borrower's current outstanding mortgage balance. This means that every month you pay back a portion of the principal (the amount you’ve borrowed) plus the interest accrued for the month. Your mortgage lender will use an amortization formula to create a payment schedule that reflects your principal and interest on the loan.
What determines my mortgage interest rate?
Like gas prices, mortgage rates can fluctuate from day to day depending on changes in housing market conditions, says Jack Guttentag, author of "The Mortgage Encyclopedia." But even saving a fraction of a percent on your interest rate can save you thousands of dollars over the life of your mortgage.
Six key factors affect your interest rate:
Credit score: Your credit score is a numerical representation of your track record of paying off your debts, from credit cards to college loans. Mortgage lenders use your credit score to predict how reliable you’ll be in paying your home loan. In general, consumers with higher credit scores receive lower interest rates than consumers with lower credit scores. A perfect credit score is 850, a good score is from 700 to 759, and a fair score is from 650 to 699.
Loan amount and down payment: If you're willing and able to invest a large down payment in your home, mortgage lenders assume less risk and will offer you a better rate. (A 20% down payment makes a lender feel a lot more secure than a 10% down payment.) If you don’t have enough money to put down 20% on your mortgage, you will probably have to pay private mortgage insurance, or PMI, an extra monthly fee meant to mitigate the risk to the lender that you might default on your loan. (PMI ranges from about 0.3% to 1.15% of your home loan.) Also, depending on your circumstances or mortgage loan type, your closing costs and mortgage insurance may be included in the amount of your mortgage loan.
Home location: Mortgage rates can vary depending on where you’re buying a home. Indeed, the strength of your local housing market can drive up or drive down interest rates.
Loan type: Your interest rate will depend on what type of loan you choose. The most common type of home loan is a conventional mortgage, aimed at borrowers who have well-established credit, solid assets, and steady income. If your finances aren't in great shape, you may be able to qualify for a Federal Housing Administration loan, a government-backed loan that requires a low down payment of 3.5%. There are also U.S. Department of Veterans Affairs loans and U.S. Department of Agriculture Rural Development loans.
Loan term: The duration of your loan affects your mortgage rate. In general, shorter-term loans have lower interest rates—and lower overall costs—but larger monthly payments.
Type of interest rate: Mortgage rates depend on whether you get a fixed-rate mortgage or an adjustable-rate mortgage, or ARM. A fixed-rate mortgage means the interest rate you pay remains fixed at the same level throughout the life of your loan. Meanwhile, an ARM is a loan that starts out at a fixed, predetermined interest rate—likely lower than what you would get with a comparable fixed-rate mortgage—but the rate adjusts after a specified initial period—usually three, five, seven, or 10 years—based on market indexes.
What is an APR?
There are costs to obtaining a mortgage, says Jordan Dobbs, a loan officer at Washington First Mortgage in Rockville, MD. In a nutshell, Dobbs says, an APR is a broad measure of the cost to you of borrowing money, expressed as a percentage rate. It determines the total amount you pay annually over the life of the loan.
What determines my APR?
Because APR includes the interest rate offered on your mortgage, as well as discount points, mortgage origination fees, and other costs associated with obtaining a loan, it is usually higher—often 0.20% to 0.25% greater—than the interest rate. So, in general, the higher your APR, the higher your payments are over the life of your home loan.
Consequently, “it’s important to check both interest rate and APR when looking for a mortgage,” says Dobbs. If you’ve applied for a mortgage and received a good-faith estimate from a lender, you can find the interest rate on Page 1 under “Loan Terms,” and the APR on Page 3 under “Comparisons,” according to the Consumer Financial Protection Bureau.
APR vs. interest rate: Things to keep in mind
Pro tip: When lenders advertise APRs, they offer the rates under ideal conditions—meaning rates apply to borrowers with excellent credit and spotless documentation. Depending on your circumstances, the rates can be higher.
Moreover, lenders that offer low APRs often require high upfront fees; their points requirements, origination fees, and insurance payments might be unusually high in order to justify their lower rates.

Joe Barbee – ABR,MRP
Broker/Property Manager
Barbee Dream Homes Real Estate Group
478-978-3428
478-919-2145
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www.WarnerRobinsHouseHunter.com
www.MidGaForRent.com


For more smart financial news and advice, head over to MarketWatch.

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What our clients are saying  

Barbee Dream Homes did an excellent job selling our church’s rental home. They work hard to get your home sold. They are great with communication, advice and care about their sellers. I would recommend them without hesitation. If you need your home sold, you can trust them to give all they have on your behalf!

 

~ Craig Ruesch

I have known Joe for around 8 years or more. He has always been a man of integrity and runs his real estate team the same way. It was a no brainer when we went to purchase our home to use Joe & Jenny.

 

~ Michelle Griffin

Joe and Bob had our house closed within a month of getting it on the market. They're super quick about returning calls and messages and really took care of us. They're also laid back, which helps uptight people like me :)

 

~ Melanie Hazen

Joe made my first home buying experience unforgettable!! His dedication, integrity, and honesty are unmatched! The process was smooth and we got what we wanted. When I choose to buy again, the Barbee team will be my resource! Thank you Joe!!

 

~ Crystal Marie

So thankful for the hard work and dedication to get our house sold. They are honest, knowledgeable and great to work with.

 

~ Refuge Church

Awesome source for your real estate needs. Was very easy dealing with and informative.

 

~ Andrew Herndon

The Barbee Dream Team has truly been amazing. Every time I called and wanted to look at something or had a question they were there and available to help us. They have outstanding knowledge and compassion about the job which made this experience so amazing.

 

~ Alex Behling

Joe has been are buying agent for 2 homes. No question he has earned his commission before, during, and after our purchases. Without his hard work we could have never gotten our 2nd house, and on top of that his referrals to various contractors has saved us thousands of dollars.

 

~ James Rivers

The Barbee Dream Homes Team rented our investment property in no time. We are looking forward to investing more money in the Warner Robins area and The Barbee Dream Homes Team will be our exclusive agent. Thanks for a job well done.

 

~ Sandy Camp

Most trustworthy, hardworking, and knowledgeable agents in the middle GA area! I would not go through any other team BUT them! If you worried about who you can trust and who is going to work the hardest for you, let me put your mind at ease and refer you to The Barbee Dream House Team!!! Joe and Jennifer will work their hardest for you!

 

~ Lindsay Thrasher

By far the best agents I've ever used. Great service. They go above and beyond to exceed needs. Very professional and knowledgeable.

 

~ Kathy Jarzynka

We have worked with Joe on several occasions. He recently sold one of our rental houses for us. He was also the one we bought the home from as well as another rental house that we purchased with his help. Joe has always been honest and extremely helpful. I remember one time we were looking at a house and he told us we could look but that he wouldn't let us buy this house because it had too many problems and wasn't worth buying. He was very good at the negotiations and always had our best interest in mind. We recommend he all the time when we hear someone needs a realtor!

 

~ Pam Cliffe

Joe is very honest and hard working. When I purchased my first home he took care of everything made sure my family settled in to a nice house at an affordable price.

 

~ Aaron Meredith

I could not ask for a better Realtor than Joe Barbee. He is the most honest and trustworthy person I have dealt with. He never made us feel pressured to make an offer. It was a GREAT buying experience and we are so happy in our the home he helped us purchase!! He returned every call we made to him and was available ANY time we wanted to view a listing. I will use him again and I recommend him to everyone I know looking to buy or sell.

 

~ Chrissy Todd

Joe always returned my phone calls and emails promptly which was extremely important to me as I had dealt previously with a realtor who was not very responsive. He was very flexible with the times he was available to show me houses. He's very friendly, laid back and approachable.

 

~ Jessica Gaskins

Joe Barbee is our hero! He is very straight-forward about a house's assets and sort-comings and never tried to "sell us ON a house", but instead searched high and low for the perfect home for our needs, desires, and price, so that THE HOUSE sold ITSELF to us. His diligence and dedication continue to amaze us. Our lengthy circumstances presented him with numerous challenges and obstacles in the selling of our home and the purchase of another. But he hung in there with us from start to finish. Every issue that arose was handled quickly and professionally, and usually before we even knew there was a problem! I would definitely recommend Joe Barbee to anyone looking to buy or sell real estate in Middle Georgia. We are extremely satisfied customers.

 

~ Domino Persson

Working with Joe was fantastic. He really took the time to ensure our needs were met. I have never seen anyone work harder to get the job done right and in a timely manner. Plus, his demeanor was so easy going that I truely felt that I was talking to an old friend. I would recommend him, without reservation to anyone in need of his skills.

 

~ Rachel Benton

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