Terms of Use:   

The annual percentage rate (APR) is an interest rate that is different from the rate stated on the loan and is commonly used to compare loan programs from different lenders. The Federal Truth in Lending law requires financial institutions to disclose the APR when they advertise a rate. Typically the APR is found next to the rate in the ad.

The APR is designed to measure the "true cost" of a loan, and was intended to create a level playing field for lenders by preventing lenders from advertising a low rate and hiding fees.

The APR provides a great starting point when comparing loan products from various lenders.  However, different lenders can and do calculate a loan's APR differently. The difference comes about since all loan fees are not required to be included in the APR. 

The best way to understand your total loan cost is to ask lenders to provide you with a good-faith estimate of their costs on the type of mortgage you are interested in getting. You then need to factor in the differences in fees along with the APR to determine which lender provides you with the most favorable deal.