Different Loan Programs

Your annual percentage rate, or APR, is one of the many costs that comes with a mortgage. While your mortgage’s interest rate is the annual cost to borrow money (expressed as a percentage), your APR takes other fees and charges into account.

Your APR includes the loan’s interest rate, any mortgage points you purchase, and lender and broker fees. Looking at your APR can give you a picture of the true cost of your mortgage.

A mortgage’s APR is usually more than its interest rate.

Charging fees is one way that lenders make money off mortgage loans. Mortgage fees should be listed on your closing documents and may include the following:

Origination fee
Application/processing/administrative fee
Underwriting fee
Points fee
Appraisal fee
Inspection fee
Attorney review fee
Private mortgage insurance
Homeowners insurance
Title search or insurance fees
Survey fee
Prepayment penalty

The most common type of mortgage loan is a conventional loan. Other types are backed by the Federal Housing Administration or are from a special program such as the Veterans Administration or the USDA.

Most mortgages are conventional, meaning they’re not part of any specific government program — though they’re still subject to federal mortgage laws. Conventional loans typically cost less than FHA loans, but it may be harder to qualify for a conventional loan.

The FHA regulates and insures FHA loans, and private lenders make the loans. FHA loans allow you to borrow with a lower down payment and generally with lower credit scores. But you may be limited on how much you can borrow through an FHA mortgage.

Special home loan programs are tailored for certain groups. For example, VA loans are for veterans, military service members or surviving spouses, while USDA loans are for lower- or middle-income borrowers in rural areas.

Each lender will have its own requirements for what documents to submit when applying for a mortgage. But here’s the info you’ll generally need to provide.

A month’s worth of paystubs
W-2s for the past two years
Your federal income tax return for the past two tax years
Proof of income
Recent bank statements
Proof of your down payment amount, such as a savings account statement
Documentation of a name change (if you’ve recently changed your name)
Identification, such as a driver’s license
Your Social Security number
A certificate of housing counseling or home-buyer education (if you have one)

It depends — mortgage rates are generally influenced by the prime rate. Many banks base their prime rates on the federal funds rate, which is the rate banks charge each other for short-term loans. When the Federal Reserve changes the federal funds rate, mortgage interest rates can react and go up or down.

But a lower (or higher) prime rate doesn’t necessarily determine the mortgage rate you’ll qualify for. Your credit scores, the type of loan you’re seeking, the price of your home and how much down payment you can afford can also affect your mortgage rate.