The APR is expressed as a yearly rate, and is defined as the cost of credit to the borrower in relation to the amount borrowed. Obviously the higher the APR the higher the cost of the credit. The following fees are typically those included in the calculation: Origination Fees, Points, Prepaid Mortgage Interest, Buydown Funds From the Buyer, Mortgage Insurance Premiums, and Additional Lender Fees (Application, Processing, Tax Service, Etc.)
A prequalification is obtained after you provide your income, expenses, and asset information to your lending professional. You may or may not complete a loan application at this stage. In addition a credit report may or may not be obtained. The prequalification is based upon the information you have provided. In many cases a prequalification is sufficient for a homebuyer to make an offer on a property. The seller is content to know that the buyer has spoken with their lending professional, discussed and/or presented their financial information, and was prequalified to purchase a property for "X" amount, as well as obtain a loan for "X" amount.
A preapproval takes the prequalification process one step further. After you have completed a loan application, provided your income, expenses, asset information, and a credit report has been run, you can obtain a preapproval. We obtain a loan approval and commitment letter from one of our lenders prior to the buyer finding a property. Many of the lenders will even allow borrowers to lock in an interest rate for a specified period of time while looking for a home. The preapproval facilitates more buying power for the borrower and faster closings.
Rate locks are a way of protecting you from the rise in interest rates during your loan process. You can lock your rate in with some lenders for as long as 120 days. The one thing you must remember is that with most lenders your rate is protected if rates rise or fall. That means that if the rates improve during your process, you still will get the rate you locked in at. One simple loan application opens the doors to hundreds of loan programs!