APR is a federally engineered term that is very confusing to most customers. Simply put, APR is an equation that shows the true cost of a mortgage including costs associated with the loan itself.

If you notice on loan documents, when an interest rate is quoted, it will show APR usually below. In fact, it is mandated it be shown.

For example, if a bank offers you a loan with a good interest rate and low fees, the APR will be somewhat close to the actual interest rate on the loan. If another bank offers you the same interest rate, but heightens the cost due to inflated fees or points, the APR will reflect higher.

This allows you to compare "apples to apples" on similar loan products.