Interest rates are impacted by a borrower's credit score, loan term, mortgage loan program and a series of market factors that are outside of our control. Unfortunately, many advertisers will tease a low interest rate in a marketing campaign for the purpose of creating interest in a specific loan program which may only fit a unique type of qualified borrower.
Lenders set their rates every day based on the market activities of Mortgage Bonds also know as Mortgage Backed Securities (MBS). On volatile days, a lender might adjust their pricing anywhere from one to five times, depending on what's taking place in the market.
The terms annual percentage of rate (APR) and nominal APR describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage, credit card, etc. It is a finance charge expressed as an annual rate.
The nominal APR is calculated as: the rate, for a payment period, multiplied by the number of payment periods in a year.
However, the exact legal definition of "effective APR" can vary greatly, depending on the type of fees included, such as participation fees, loan origination fees, monthly service charges, or late fees.The effective APR has been called the "mathematically-true" interest rate for each year. The computation for the effective APR, as the fee+compound interest rate, can also vary depending on whether the up-front fees, such as origination or participation fees, are added to the entire amount, or treated as a short-term loan due in the first payment.
Since origination fees, discount points, mortgage insurance premiums, prepaid interest and other items may also be required to obtain a mortgage, they need to be included when calculating the APR. Fees such as title insurance, appraisal and credit are not included in calculating the APR.
The APR can vary between lenders and programs due to the fact that the federal law does not clearly define specifically what goes into the calculation.