What do the acronyms APR, FRM and ARM mean?

APR stands for Annual Percentage Rate. This number includes some of the various costs of obtaining a mortgage loan and converts them into a single value in order to help you comparison shop for your loan. However, it is a misunderstood and often misleading number and can actually cause more confusion than it alleviates. Due to what is a rather flawed calculation, many ARMs have APRs far less than their actual contract interest rates, when it should be the other way around.

FRM and ARM are simple -- Fixed Rate Mortgage (FRM) and Adjustable Rate Mortgage (ARM) -- two basic types of mortgages. FRMs have interest rates which never change, while ARMs have rates that can change anywhere from one time over a 30-year term to as many 360 times.

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Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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