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Wondering what income you'll need to buy a median-priced home? See our latest metropolitan area home affordability analysis

Wondering what income you'll need to buy a median-priced home? See our latest metropolitan area home affordability analysis

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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APR 26, 2021
A:

APR is perhaps the most misunderstood part of mortgage finance. "Rate", or more properly "contract interest rate" is the actual rate of interest you are being charged...

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