What is the difference between APR and APY? In the simplest terms, the APR is the "Rate" you pay on paper, the APY is the actual "Yield" after expenses for the Loan Originator. Basically, the bigger the difference between the APR and APY, the more costs that are built into the loan, and the more profit for the bank.
This can be built into the loan or fees you pay up front that make the yield higher for the investor or loan broker. This is why shopping a loan is so important. If you aren't sure about the differences in loans ask your agent or accountant.
For instance a VA loan will normally have a higher APY because there is a "funding fee" that is standard with every loan. That funding fee is either paid up front or rolled into the loan. Rolling it into the loan means you owe more money than the bank pays the seller. For instance if you bought a house for $200,000 and had a 1% funding fee, the loan would actually be for $202,000 because the 1% fee is added to the loan. This is "rolling it in".
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