The annual percentage rate (or APR) is the amount of interest on your total loan amount that you'll pay annually (averaged over the full term of the loan). A lower APR could translate to lower monthly payments. (You'll see APRs alongside interest rates in today's mortgage rates.)

In many cases, it makes the most sense to choose a mortgage loan with a lower APR. However, sometimes a loan offer with a lower APR may require you to pay mortgage points or other fees. If you'd rather use that money toward a down payment or to buy appliances and furniture for your new home, you might choose a loan with a slightly higher APR that doesn't have these requirements.

While the APR makes it easier to compare mortgage offers, you'll want to weigh all of the factors involved in getting a mortgage loan. These include the size of your down payment, closing costs and money you'll need to set aside to furnish and maintain your home. The mortgage rate and payment calculator is a good place to start.

What is the difference between APR and interest rate?

At its simplest, the interest rate reflects the current cost of borrowing. The APR provides a more complete picture by taking the interest rate as a starting point and accounting for lender fees required to finance the mortgage loan.