Q1: What’s a better 300,000 loan: 3.5% rate with an APR of 3.5% or a 3.25% rate and a 3.335% APR?
The 300,000 loan with an APR of 3.335% has $2,697.00 more in closing costs than the 3.5% APR loan. It will actually take 7.5 years for the lower rate to save you enough to cover the extra closing costs. So the correct answer is it depends on how long you keep the loan.
Q2: OK, so now I know I can’t just use the APR to figure out what loan is the best for me. But at least I know all the fees are calculated in the APR. Right or wrong?
Wrong. Many of the largest fees do not affect the APR. Appraisal costs, title fees, notary fees, recording fees, credit report fees are just some of the fees that are not reflected in the APR.