The annual percentage rate (APR) is the yearly cost of your loan with the fees baked in. While the interest rate covers only the cost of borrowing the money itself, APR also folds in charges like the origination fee, discount points, and certain other closing costs, expressed as a single yearly percentage.
That makes APR the better tool for comparing offers. A lender advertising a low rate but charging heavy fees can end up more expensive than one with a slightly higher rate and minimal fees — APR exposes that trick.
Two caveats. First, APR assumes you keep the loan for its full term; if you sell or refinance early, upfront fees hurt more than the APR suggests. Second, lenders do not all include exactly the same fees in the calculation, so read each Loan Estimate line by line. Compare current offers on our mortgage rates page — and always look at the rate and the APR together.