What is an APR? APR stands for annual percentage rate. This is not the rate of your loan, but the rate of your loan after the cost of securing the loan is calculated into it. It is used to compare loans to see which loan is better, if the loan is kept for 30 years.  Everybody’s situation is different, so a loan with a lower APR doesn’t necessarily mean it is the better loan, especially since the odds of the loan staying around for 30 years are slim to none. A knowledgeable loan officer can better guide you in regards to what loan is better for you than using an APR as a sole criteria for choosing a program. To better explain APR, I find it is easier to give examples. Assume you go to three lenders and get three rate quotes. All three lenders quote you a rate of 6.5%.  One lender has an application fee and a processing fee, but no PMI and no points. Another lender has the same fees, but is charging PMI.   The last lender has the same fees, plus 1 point, and is also charging PMI. The payment on each loan would be the same, because the rate is the same, but the cost acquiring each loan is different, so the APR’s would be different. The first lender would have the lowest APR (but the actual rate would still be higher because there are fees). The last lender would have the highest APR.  All lender fees, and lender required fees, like PMI or the lender’s portion of the title insurance, are calculated into the APR. The only way to have an APR equal to the actual rate is if somebody opened their check book, wrote you a check without any costs associated with the loan.