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Your interest rate is the amount your lender charges to finance your home purchase. APR is short for annual percentage rate and factors in all the costs you’ll pay to get a mortgage. The bigger the difference between your interest rate and APR, the more you’ll pay in closing costs.
Lenders look at your debt-to-income (DTI) ratio to determine how much you can afford based on the loan program you apply for. Government-backed loans usually allow for more DTI ratio exceptions than conventional loans.
Once you’ve received a loan estimate that fits your needs, you should ask for a rate lock. Provide the requested loan paperwork quickly so your loan closes before the rate expires and you avoid costly extension fees.
A lender credit is a cash credit your lender may offer to cover some or all of your closing costs if you’re willing to pay a higher interest rate. Although you’ll save money at closing, you’ll spend more on interest charges for the life of your loan.