by Cautious Consumer
(Missouri, USA)
Ask Kate: APR Explained - What is the difference between the locked mortgage rate and effective APR?
Hi Kate, I have a real estate sales contract due to close on October 26. Three days ago, I locked in my rate over the phone with the lender.
The rate lock fee was paid with a credit card. On the same day that the rate was locked in, the lender overnighted to me all materials requiring my review and signature, including a written but unsigned rate lock agreement.
Now for the problem: My rate was locked in at 4.875% on a FHA 30 year fixed rate loan. However, the Truth-in-Lending Disclosure Statement forwarded by the lender lists the annual percentage rate as 5.431%. While I know the actual effective A.P.R. takes into account fees that the lender must report to the government, a .556% increase seems excessive. Should I be leery of this lender, or am I simply overreacting?
Also, are you aware of any particular steps I will need to take should I decide request a refund of my rate lock fee?
Thanks in advance for your insight. Cautious Consumer


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