Why are Mortgage Rates Different by Lender?

Understanding why mortgage rates vary by lender can help you select the right lender for your situation.

Why do Mortgage Rates Differ by Lender?

While interest rates are determined by national and world market forces, there are a number of reasons mortgage rates are different for different lenders. These include lender overhead costs, closing costs, and mortgage bankers’ experience, among other factors.

What Causes Different Mortgage Rates Between Lenders?

Lender Overhead Costs

The lender’s overhead cost structure is a big factor in determining why mortgage rates are different by lender. Lenders who contain cost and keep their overhead low have the ability to offer better rates and/or closing costs.

Closing Costs

Closing costs are directly associated with the home interest rate being offered. A lender may have a lower rate that is disguised by higher closing cost. This means that you are effectively paying for the lower rate and this may not be in your best interest.

Incomplete Information

Inaccurate rate quoting can make it appear that a lender’s rate is lower than others and maybe even lower than the overall market. Lenders are usually within .25 percentage points of each other. If one lender’s rate stands out from all the others, it may be a misquote.

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