Posted on: 09th Apr, 2007 06:21 pm
I locked in a mortgage w/ 1st Niagara bank for 6.0%. The closing costs were around 4k or so and there were no points or additional fees.
when i got the truth in lending report the APR was 6.75%!! I immediately called my lender and they told me the reason for the increase was due to PMI. Can PMI really bump the APR up from 6 to 6.75? I checked over the mortgage app and good faith estimate and couldn't find any "hidden charges".
Can someone explain this change in APR?
when i got the truth in lending report the APR was 6.75%!! I immediately called my lender and they told me the reason for the increase was due to PMI. Can PMI really bump the APR up from 6 to 6.75? I checked over the mortgage app and good faith estimate and couldn't find any "hidden charges".
Can someone explain this change in APR?
apr measures true cost of the loan. And apr does include pmi amounts. interest rate quoted does not include these fees and pmi while the apr is calculated by taking them into consideration.
If you are borrowing $200,000, a 30 yr. mortgage at 6% and closing costs are $4,000 & PMI is $1,500 then you are only "netting" $194,500. Your loan balance on the day the loan funds is still $200,000. APR, in this case, is the interest rate on $194,500 which would produce the same monthly payment as the note rate of 6% does on the loan amount of $200,000. But as I calculated apr should be around 6.30% if the pmi is $1,500.
check if these other expenses are also there for you as they are also considered in apr calculation: Pre-paid interest, Loan-processing fee, Underwriting fee, Document-preparation fee.
If you are borrowing $200,000, a 30 yr. mortgage at 6% and closing costs are $4,000 & PMI is $1,500 then you are only "netting" $194,500. Your loan balance on the day the loan funds is still $200,000. APR, in this case, is the interest rate on $194,500 which would produce the same monthly payment as the note rate of 6% does on the loan amount of $200,000. But as I calculated apr should be around 6.30% if the pmi is $1,500.
check if these other expenses are also there for you as they are also considered in apr calculation: Pre-paid interest, Loan-processing fee, Underwriting fee, Document-preparation fee.
Ice,
This should give you a better idea of how apr becomes higher than the quoted interest rate:
lets take a 30 year frm of $150,000 with interest rate of 8.50%, the payments will be coming to $1,153.37. Now the apr would be 8.73% if there are 1.50 points amounting to $2,250, appraisal fee of $275, processing fee of $500 & report fee of $50 equalling $3,075.
So true cost of the loan is calculated to be $150,000 - $3,075 coming to be $146,925. Interest rate on this amount which gives the same monthly payment of $1,153.37 would be 8.73%.
This should give you a better idea of how apr becomes higher than the quoted interest rate:
lets take a 30 year frm of $150,000 with interest rate of 8.50%, the payments will be coming to $1,153.37. Now the apr would be 8.73% if there are 1.50 points amounting to $2,250, appraisal fee of $275, processing fee of $500 & report fee of $50 equalling $3,075.
So true cost of the loan is calculated to be $150,000 - $3,075 coming to be $146,925. Interest rate on this amount which gives the same monthly payment of $1,153.37 would be 8.73%.
check if these are also included in the gfe/truth in lending disclosure statement, apart from pmi;
Points
Loan-application fee
Credit life insurance
then you will be able to figure out why the apr is coming to 6.75% while the quoted rate is 6%
Points
Loan-application fee
Credit life insurance
then you will be able to figure out why the apr is coming to 6.75% while the quoted rate is 6%
"I locked in a mortgage w/ 1st Niagara bank for 6.0%. The closing costs were around 4k or so and there were no points or additional fees.
when i got the truth in lending report the APR was 6.75%!! I immediately called my lender and they told me the reason for the increase was due to PMI. Can PMI really bump the APR up from 6 to 6.75? I checked over the mortgage app and good faith estimate and couldn't find any "hidden charges".
Can someone explain this change in APR?"
You should ask for a clear explanation of how much is the PMI amount and how it is making the apr go to about 6.75% if there are no other fees or points. It should not increase by .75% just because of PMI amount.
Miller
when i got the truth in lending report the APR was 6.75%!! I immediately called my lender and they told me the reason for the increase was due to PMI. Can PMI really bump the APR up from 6 to 6.75? I checked over the mortgage app and good faith estimate and couldn't find any "hidden charges".
Can someone explain this change in APR?"
You should ask for a clear explanation of how much is the PMI amount and how it is making the apr go to about 6.75% if there are no other fees or points. It should not increase by .75% just because of PMI amount.
Miller