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Guide

How to Compare Mortgage Offers (Points and APR)

How discount points and APR differ from the interest rate, with CFPB Loan Estimate rules. Educational comparison math, not a quote or a lock.

Published: 2026-09-03

Key takeaways

  • The CFPB says an APR reflects the interest rate plus other charges, including points, mortgage broker fees, and other costs to get the loan. The interest rate alone does not include those fees.
  • One discount point equals 1 percent of the loan amount. On a $100,000 loan the CFPB's example is $1,000. Points buy a lower rate. Lender credits work in reverse.
  • Lenders must provide a standard Loan Estimate within three business days of a complete application. Rate is on page 1 under Loan Terms. APR is on page 3 under Comparisons.
  • Compare offers with the same loan type, the same points or credits, and the same lock period. A lower advertised rate can cost more once points and cash to close are included.

Published: 2026-09-03

The interest rate on a flyer is not the whole price of a mortgage. Points change what you pay at closing. APR folds many of those upfront charges into one yearly figure so two written offers can be compared.

This page explains that comparison in CFPB terms. It is education, not advice and not a lock. HomeMortgageOnline does not issue Loan Estimates or guarantee an APR.

What is the difference between rate and APR?

The interest rate is the yearly cost of borrowing expressed as a percentage. The CFPB says it does not reflect fees or other charges you may pay for the loan.

APR is broader. The CFPB, last reviewed August 28, 2026, says an APR "reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan." For that reason the APR is usually higher than the interest rate.

On a Loan Estimate, the interest rate sits on page 1 under Loan Terms. The APR sits on page 3 under Comparisons. Matching those two lines across lenders is more useful than matching headline rates pulled from different days.

Rate note: published APRs and rates are not a personal quote. They change with credit, points, fees, lock period, and the day the lender prices the file. Nothing here is a rate lock or a guaranteed APR.

How do discount points and lender credits work?

Discount points are an upfront trade. You pay more at closing and receive a lower interest rate than that lender's zero-point price for the same loan. Lender credits reverse the trade: a higher rate in exchange for money toward closing costs.

The CFPB defines one point as 1 percent of the loan amount. One point on a $100,000 loan is $1,000. Points do not have to be whole numbers. A lender can quote 0.125, 0.5, or 1.375 points. By law, points listed on the Loan Estimate and Closing Disclosure in Section A must be connected to a discounted interest rate.

How much rate one point buys depends on the lender, the product, and the market that day. The CFPB's worked example uses a $180,000 30-year fixed loan at 5.00 percent with zero points. Paying 0.375 points ($675) drops the example rate to 4.875 percent and the example payment by $14 a month. Taking a 0.375 credit raises the example rate to 5.125 percent and the example payment by $14 a month, while putting $675 toward closing costs.

Those dollar figures are the CFPB's illustration, not current market pricing and not an offer. Use them to see the shape of the trade, then plug your own cash-to-close pieces into the closing cost calculator.

How do you line up two Loan Estimates?

The CFPB requires a three-page Loan Estimate within three business days after a complete application. Every lender uses the same form, which is the point. Side-by-side pages beat a verbal quote.

Hold these items constant before you compare APRs:

  • Loan amount, product, and term (for example 30-year fixed conventional).
  • The same points or credits, or a clear zero-point column from each lender.
  • The same assumed lock period.
  • Cash to close after credits, not only the rate.

Section A origination charges are lender-controlled. Section C services can often be shopped. A low rate funded by high points can lose once you add cash to close. Fannie Mae's consumer tools describe closing costs as commonly 2 percent to 5 percent of the mortgage amount. That range is a planning band, not a quote for your file.

The CFPB also warns that ARM APRs do not reflect the maximum interest rate, and that mixing fixed APRs with ARM APRs is a weak comparison. Compare like with like.

How do you test whether points break even?

A simple educational check is months to recover the extra cash: extra points paid, divided by the monthly principal-and-interest savings versus the zero-point offer from the same lender. If the CFPB example saved $14 a month after $675 in points, the arithmetic recovery is about 48 months. That is calendar math, not a recommendation to buy or skip points.

The recovery window moves if you refinance, sell, or reprice before those months elapse. It also moves if a competing lender can match the lower rate with fewer points. Ask each lender for a zero-point Loan Estimate and a with-points Loan Estimate on the same day so the comparison is clean.

Lender credits flip the same math. You pay more each month and bring less cash to closing. That can fit a short stay or a tight cash-to-close number. It is still a trade, not a discount from nowhere.

What belongs next to APR on the worksheet?

Write down PMI or FHA MIP, because mortgage insurance changes the monthly total without always showing up the way borrowers expect. Write down prepayment-penalty and balloon-payment flags from the Loan Estimate. Write down the estimated cash to close after seller and lender credits.

Then price the payment itself in the mortgage payment calculator using the Loan Estimate rate, not a national average. The calculator does not replace the disclosure. It only shows how principal, interest, taxes, and insurance stack.

If two APRs are close and cash to close is not, the cash figure can decide the file even when the rate looks prettier. That is why this page ties to the closing-cost tool rather than to a rate table.

Disclaimer: this guide is for general education. It is not financial advice and not a commitment to lend. HomeMortgageOnline does not lock rates, issue Loan Estimates, or promise an APR. Offers vary by lender, credit, points, fees, and market conditions.

Sources

  1. Consumer Financial Protection Bureau, What is the difference between a mortgage interest rate and an APR? (last reviewed August 28, 2026) - https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr-en-135/
  2. Consumer Financial Protection Bureau, How should I use lender credits and points? - https://www.consumerfinance.gov/ask-cfpb/what-are-discount-points-and-lender-credits-and-how-do-they-work-en-136/
  3. Consumer Financial Protection Bureau, What is a Loan Estimate? - https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/
  4. Fannie Mae, Closing costs calculator (2% to 5% common range) - https://yourhome.fanniemae.com/calculators-tools/closing-costs-calculator

Frequently asked questions

Is APR the same as the mortgage interest rate?

No. The CFPB says the interest rate is the yearly cost of borrowing and does not include fees. APR adds points, mortgage broker fees, and other charges to get the loan, so it is usually higher. On a Loan Estimate, rate is on page 1 and APR is on page 3. Neither figure is a lock.

What is one mortgage discount point?

The CFPB says one point equals 1 percent of the loan amount. On a $100,000 loan that is $1,000, paid at closing. Points listed in Section A of the Loan Estimate must be tied to a lower interest rate. The rate drop per point varies by lender and day. It is not a promised savings figure.

Should I buy points to lower my rate?

This site does not advise yes or no. Points raise cash to close and can lower the rate versus that lender's zero-point price. A simple educational check is extra cash divided by monthly savings. If you refinance or sell first, the cash may not come back. Compare two same-day Loan Estimates from the same lender.

How soon do I get a Loan Estimate?

The CFPB says the lender must provide a Loan Estimate within three business days of receiving a complete application. The form is standardized so you can compare estimated rate, payment, and total closing costs. A Loan Estimate is not an approval and not a rate lock. It shows the terms the lender expects if you move forward.

Why can a lower rate still cost more?

A lower note rate can be funded with more discount points or higher origination fees. APR and cash to close capture that trade better than the rate alone. Fannie Mae's consumer tools put many closing-cost totals in a 2 to 5 percent band of the loan amount. Compare written estimates, not advertisements.