“Is APR the best way to shop for a loan?”
From my preferred lender, Robert Geiler of Rancho Financial:
“The APR was developed to show borrowers the true cost of getting a loan as an interest-rate rather than a dollar amount. It was supposed to make it easier for to compare rates because, theoretically, the rate should include the costs of getting the loan. Unfortunately, HUD (U.S. Dept of Housing & Urban Development) did not standardize all the fees that must be used to calculate the APR. Some lenders do not include certain fees that other lenders include, rendering the APR a useless rate to compare.
For example, escrows are not used in all states. Since most online lenders serve several states, they don’t include escrow fees when calculating an APR (though they’re supposed to). So an APR by a California-based lender will typically be higher than an online lender.
In addition, fees for processing, underwriting, notary, courier, emailed documents, tax service, sub-escrow, loan tie-in, etc., are all APR fees. But many lenders bundle those fees into areas that are not addressed in the RESPA guidelines specifically so their APR appears lower.
I could go on and on about treatment of FHA MIP premiums, VA funding fees, mortgage insurance premiums, monthly mortgage insurance, etc, but I think you get the point.
APRs are not the way to shop for a loan.”