What Affects APR?
Factors that affect the APR, along with the amount of fees associated with the loan, include the actual note rate (the simple interest rate offered by your lender), any rate buy down (discount point) and the time period for which the loan is calculated. The latter is why a consumer should never make their loan decision based solely on APR when comparing, for example, an APR on a 30 year loan duration to the APR for another loan with a shorter loan duration (25, 20, or 15 year).
In addition, most APR calculators assume that an individual will keep a particular loan until it is completely paid off resulting in the up-front fixed closing costs being amortized over the full term of the loan. If the consumer pays the loan off early, the effective interest rate achieved will be significantly higher than the APR initially calculated. This is especially problematic for mortgage loans where typical loan durations are 15 or 30 years but where many borrowers move or refinance before the loan period runs out.
In theory, this factor should not affect any individual consumer's ability to compare the APR of the same product (same duration loan) from lender to lender. APR may not, however, be particularly helpful when attempting to compare different products, like ARM loans. Yet, you may want to compare VA loans to other types of loans, (FHA or conventional), to see how the VA funding fee affects the APR on a VA loan in comparison to the FHA loan or conventional loan that has mortgage insurance.
Again, because there are no lender fees on VA loans you get from your FREE VA LOAN lender, the APR will always be lower than other lenders who charge fees, offering the same rate. Look here for more information on getting a VA loan with a lower APR.