Tag Archives: mortgage

APR vs Interest Rates

When financing a new home, you’ll need to learn the difference between the APR and the interest rate.

When comparing long-term loans, the interest rate and the annual percentage rate (APR) are often confused. While the interest rate refers to the annual interest expense of the loan, the APR reflects the annual cost of borrowing money from the lender.

Clear as mud? Don’t worry; we can help. Let’s take a closer look at the difference between these two terms and how each one impacts your loan.

Interest rate defined

The interest rate, or the nominal rate, is the rate of interest the lender charges the borrower for the loan. For example, a $300,000 mortgage with a 4% interest rate would have an annual interest expense of $12,000, or $1,200 a month. This number only represents the interest rate on the loan and does not factor any other costs.

Interest rates are influenced by the federal funds rate, which is set by the Federal Reserve, otherwise known as “the Fed.” The federal funds rate is the interest rate at which banks lend each other money overnight.

During an economic recession, the Fed will lower the federal funds rate to encourage consumers to borrow and spend more money. During the coronavirus recession, for example, the Fed slashed the federal funds rate to just .25%.

In contrast, during times of economic growth, the Fed will raise the federal funds rate to encourage personal savings for balancing out the cash flow and stabilizing inflation.

APR defined

The APR on a loan is the approximate annual cost of borrowing money from a financial institution.

The APR includes the interest expense, along with all other fees and costs involved in taking out the loan. This can reflect closing costs, loan origination fees, mortgage insurance, broker fees and rebates. The APR is expressed as a percentage of the entire loan amount and will nearly always be greater than the interest rate.

On a $300,000 mortgage with closing costs, loan origination fees and mortgage insurance totaling $5,000, the loan amount would be adjusted to $305,000. The 4% interest rate will then be used to calculate a new annual interest expense of $12,200. To determine the APR on the loan, divide the annual payment of $12,200 by the original loan amount to get 4.06%. The borrower will now pay this percentage of their loan each month.

Which number is more important to consider when taking out a loan?

Here’s where the two terms can get confusing.

When comparing rates on two different loans, the loan with the lower nominal interest rate will generally offer the better value since the bulk of the loan amount is being financed at a lower rate. Usually, the loan with a lower nominal rate will also feature a lower APR.

While a loan with a lower APR is generally the better choice, it’s important for borrowers to consider the length of time they plan to stay in their home. Most home buyers will need to purchase discount points, also known as mortgage points, to qualify for loans with lower APRs. Each point costs 1% of the mortgage (or $1,000 for every $100,000) and will lower the interest rate by .25%. Discount points need to be purchased upfront. This means the borrower will need to pay thousands of dollars at closing to qualify for a lower-APR loan.

It can take more than five years for the borrower to break even on the extra costs they paid for the loan through their lower monthly payments. Consequently, for home buyers who plan to move within the next decade or sooner, it may make more sense to choose a loan with a higher APR and fewer upfront costs.

Taking out a home loan involves multiple decisions, which will affect your finances for years to come. It’s important to learn the difference between interest rates and APRs and to run the numbers to determine which loan offers you the better value before choosing a loan.


If you’re planning to take out a home loan in the near future, connect with our Lending Specialists to explore your options at 503-275-0300 Option 2.

All You Need To Know About Home Loans

Here at USAgencies Credit Union, we provide a variety of products and services to meet your specific financial needs and in the most ideal ways possible. One such example is home loans. Let’s take a closer look at how its application process works.

What is a home loan?

A home loan, or a mortgage, enables you to purchase a home without having to foot all the cash out of your pocket when purchasing. You will, however, need to make a down payment, which is typically between 3.5-20% of the home’s appraised value, along with closing costs and some other fees. The lender then finances the rest of the purchase. You’ll repay the loan, along with interest, over the course of (generally) 15 to 30 years.

Are all home loans alike?

Before you get started, you’ll need to choose a mortgage type. A conventional loan will necessitate a 5-20% down payment on the home. There’s also an FHA loan, which only requires a down payment of 3.5%, but necessitates mortgage insurance. If you’re a military veteran, consider obtaining a VA loan, which lets you buy a home with zero down payment.

Once you’ve chosen the kind of loan which is best for your scenario, you may be given a choice of repayment arrangements for that loan. Here are the three common types of mortgages:

  1. 30-year fixed-rate mortgage. The interest rate on this 30-year mortgage will remain fixed no matter the changes to the national rate.
  2. 15-year fixed-rate mortgage. This mortgage will also have a fixed interest rate, but the term lasts just 15 years. The monthly payments will be higher, but the overall interest paid over the course of the loan will be significantly lower.
  3. Adjustable-rate mortgage (ARM). An ARM gives the borrower a lower interest rate in the early years of the loan, and then a gradual increase (adjustment) in rate over the rest of the life of the mortgage.

What do I need to know before applying for a home loan?

A home is likely to be the largest purchase you will ever make. To qualify for one, you will need to prove that you are living a financially responsible life and that you can afford the monthly payments.

The primary way lenders gauge your financial responsibility is through your credit score. This number is like a grade that tells lenders how you’ve handled your past credit card accounts and other debts. It will include the length of time you’ve had your credit cards and loans open, the timeliness with which you’ve made your payments, the trajectory of your debt and the amount of available credit you might use. Most lenders will only grant a home loan to borrowers with a credit score of 650 or higher. You can check your score for free with My Credit Score in our Online and Mobile Banking. You might also consider ordering a free credit report from all three major credit bureaus once a year at AnnualCreditReport.com.

During the time leading to your mortgage applications, make sure to pay all your bills on time, don’t open new credit cards and work on paying down overall debt. A higher credit score will help you get approved quicker and it will net you a lower interest rate on your loan.

Another crucial factor in determining your eligibility for a mortgage is your debt-to-income ratio, or your DTI. Lenders want to know how big your collective outstanding debt will be in relation to your income if you receive the home loan. Most lenders will only allow a maximum DTI of 36%.

When should I apply for a home loan?

While you won’t need the loan until you are ready to close on a house, it’s a good idea to start the process before you begin house-hunting. Your lender will let you know whether you can expect to be approved for a loan and will provide you with an estimate of how much house you can afford so you don’t face disappointment later.

When initially applying for a home loan, ask your lender for a letter of pre-approval. This letter confirms you are preapproved for a home loan up to a specific amount. Having this letter in hand shows real estate agents and sellers that you are serious about buying. Most pre-approvals are only good for 60-90 days, so make sure you’re ready to start house hunting before you get yours.

How do I apply for a home loan?

To apply for a home loan at USAgencies Credit Union, connect with us to help you get started. Make sure all of your financial paperwork is in order and hold onto all important financial documents in the months leading up to your application.

To make it easier, we’ve created a list of the information and documents you’ll need:

  • Name of current employer, phone and street address
  • Length of time at current employer
  • Official position/title
  • Salary including overtime, bonuses or commissions
  • Two years’ worth of W-2s
  • Profit & loss statement if self-employed
  • Pensions and Social Security check stubs
  • Proof of child support payments
  • Copies of alimony checks
  • Statements for all checking and savings accounts
  • Investments (stocks, bonds, retirement accounts)
  • Proof of any gifted funds from relatives
  • Car loan information

You will also need to explain any blemishes on your financial record; including bankruptcies, collections, foreclosures and delinquencies.


Have more questions about Buying or Refinancing, or ready to get your application started? Connect with us at 503.275.0300 or visit our website. 

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USAgencies Credit Union
NMLS#: 441193

Mortgage Closing Scams : How to protect yourself

Closing on a new home can be one of your most memorable life moments. It’s the final and one of the most critical stages in the home-buying journey, but with the exchange of key paperwork and a sizable down payment, it can also be a stressful experience, especially for first-time home buyers.

The FBI has reported that scammers are increasingly taking advantage of home buyers during the closing process. Through a sophisticated phishing scam, they attempt to divert your closing costs and down payment into a fraudulent account by confirming or suggesting last-minute changes to your wiring instructions. In fact, reports of these attempts have risen 1,100 percent between 2015 and 2017, and in 2017 alone, there was an estimated loss of nearly $1 billion in real estate transaction costs.

While it’s easy to think you may not fall for this kind of scam, these schemes are complex and often appear as legitimate conversations with your real estate or settlement agent. The ultimate cost to victims could be the loss of their life savings.

Here’s what you should know and how to avoid it happening to you.

How it works

Scammers are increasingly targeting real estate professionals, seeking to comprise their email in order to monitor email correspondences with clients and identify upcoming real estate transactions. During the closing process, scammers send spoofed emails to home buyers – posing as the real estate agent, settlement agent, legal representative or another trusted individuals – with false instructions for wiring closing funds.

How to avoid a mortgage phishing scam

  • Identify two trusted individuals to confirm the closing process and payment instructions. Ahead of your mortgage closing, discuss in person, or by phone, the closing process and money transfer protocols with these trusted individuals (realtor, settlement agent, etc.). Be cautious about exchanging any details about your closing over email. You may want to use this opportunity to also create a code phrase, known only by these trusted parties, if you need a secure way to confirm their identities in the future.
  • Write down their names and contact information. Use the Mortgage Closing Checklist created by the Consumer Financial Protection Bureau to list these individuals and their primary phone numbers.
  • Before wiring money, always confirm instructions with your trusted representatives. Never follow instructions contained in an email. Verify the closing instructions, including the account name and number, with your trusted representatives either in person or by using the phone number you previously agreed to.
  • Avoid using phone numbers or links in an email. Again, scammers can closely replicate the email address, phone number and format of an exchange from your agents. Avoid clicking on any links or downloading attachments without first confirming with your trusted representatives.
  • Do NOT email financial information. Email is never a secure way to send financial information.
  • Be mindful of phone conversations. It may be difficult to identify whether a phone call is fraudulent or legitimate. Scammers may call and ask you to verify your personal or financial information. When in doubt, always refer back to your trusted professionals to confirm whether it’s legitimate.

What to do if it happens to you

  • Contact your credit union or wire-transfer company immediately. Reporting the error as soon as possible can increase the likelihood that you’ll be able to recover your money.
  • File a complaint with the FBI. Contact the FBI’s Internet Crime Complaint Center at www.ic3.gov .

While it can be easy to think you’ll never fall for a scam of this nature, the reality is that it’s becoming more and more common, and the results can be disastrous for eager homeowners. By being mindful and taking a few important steps ahead of your closing, you can protect yourself and your loved ones.

Brought to you by our friends at the Consumer Financial Bureau


Buying or Refinancing? Talk to us first – we are here to help! Connect with our Lending Specialists at 503-275-0300 Option 2 or by visiting our Branch located at 95 SW Taylor St., Portland, OR.

Home Ownership : 5 Questions to Guide Your Decision

This article was developed as part of USAgencies Credit Union’s partnership with EverFi, Inc.

As winter melts into spring, you’ll likely start to see “For-Sale” signs popping up in your neighborhood.

Buying a home can be an exciting milestone in your life, and it’s important to educate yourself on the financial implications of home ownership before you make an offer. Whether you’re a first-time home buyer or a current owner looking to sell or refinance, there are a few key questions that should help guide your decision:

5 Questions About Home ownership

1.What are the pros and cons of owning vs. renting?

Owning a home is a long-term commitment. Recent studies show that the average buyer expects to live in their new home for 13 years before selling. While home ownership allows you to build equity and take advantage of tax benefits, owning also comes with risks.

2.Am I ready for the responsibilities of home ownership?

While property is generally considered an appreciating asset, home values are tied to economic conditions. Having your financial house in order is an important first step to buying a house! Are you confident in your ability to pay your bills on time? Are you able to budget for unanticipated costs?

3.How much home can I afford?

Determining how much home you can afford goes beyond the list price of a property. Other factors that will affect your monthly payment include interest rates, taxes, insurance, income, debt, and future monthly expenses – to name just a few. While there are numerous “affordability” calculators out there, it’s important to first understand the whole picture.

4.How will lenders evaluate my mortgage readiness & make loan decisions?

Are you familiar with the “Four C’s of Loan Credit?” – Capacity to pay back the loan, Capital, Collateral and Credit. Lenders evaluate these different factors to determine your eligibility and the terms of a mortgage loan.

5.How will my credit score impact my ability to buy?

Your credit score and the information in your credit report are key factors in whether or not you’ll be approved for a mortgage and at what interest rate. When was the last time you checked your credit?

No matter what stage of home ownership you are exploring, expanding your knowledge about the key financial questions to ask when buying a home will help you make a long-term decision that benefits you!


Have questions about Buying or Refinancing, or ready to get your application started? Connect with us at 503.275.0300 Option 2 or visit our website. 

Fair Housing Equal Opportunity Logo
USAgencies Credit Union
NMLS#: 441193