Why are Mortgage Rates Different by Lender?

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

Do Lender Rates Vary?

If you wonder who determines mortgage rates, you will find it depends on various factors. Lender rates can vary by lender, location and even the borrower. It's important to understand what determines the mortgage rates in your state so you know how to find the best rate for your home. When lenders determine mortgage rates, they consider the economy, the borrower's financial health, overhead costs, the home's value and the loan amount.

Are Mortgage Interest Rates the Same for All Lenders?

Mortgage rates vary by lender. Different lenders have different overhead costs they have to consider. They also have to consider the borrower's financial situation, including their debt-to-income ratio, credit score and down payment. To find the best mortgage rate, you need to find the right lender.

Why do Mortgage Rates Vary 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. Different lenders are willing to take different levels of risk, and they can all have a variety of different costs to consider. These can include lender overhead costs, closing costs, and mortgage bankers’ experience, among other factors.


Lender Overhead Costs

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

  • Marketing cost
  • Office space cost
  • Cost of employee wages
  • Cost of having poor risk management
  • Insurance cost

Closing Costs

Closing costs are the fees you pay your real estate attorney and mortgage lender for their services. Closing costs are directly associated with the home interest rate being offered. A lender may have a lower rate that is disguised by a 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.

Why Are Mortgage Rates Different by State?

Mortgage rates vary by state because they depend on the local economy. Your state's economic health will affect its foreclosure rate, and foreclosures cause mortgage lenders to raise their mortgage rates. If your state has a high unemployment rate, home prices will likely fall and mortgage rates may be elevated.

Why Rates Vary From Borrower to Borrower

Some factors affecting your mortgage rate are under your control because rates vary based on financial situations. Your mortgage rate will partially depend on how risky the loan appears to lenders.

Lenders will review your financial history to determine the likeliness of you making payments on time, falling behind on payments or completely stopping paying on your loan. They will consider how much money they could lose if you fail to make payments.

Credit Score

Credit scores of 740 or higher will grant borrowers the lowest mortgage rates and the widest variety of loan product choices. Interest rates will be a little higher for borrowers with credit scores between 700 and 739, and they will be even higher for borrowers with a score that is 699 or lower. However, homebuyers with credit scores as low as 580 also have low down payment mortgage options.

Debt-to-Income Ratio

Your debt-to-income ratio compares your monthly pre-tax income to your owed debt, such as student loans, leases, car loans and credit cards. It's the percentage of the income you spend on monthly debt payments and your new home loan's projected payment.

Your lender will calculate your debt-to-income ratio by adding your monthly debt payments to your projected mortgage payment and then dividing the total number by your monthly pre-tax income.

Down Payment

Your down payment amount will also affect your mortgage rate because of the impact it has on your loan-to-value ratio. The smaller your down payment is, the larger your loan-to-value ratio will be. Similarly, the larger your down payment is, the smaller your loan-to-value ratio will be.

The loan-to-value ratio compares a mortgage amount to a home's value or price. For example, if you place a $30,000 down payment on a $120,000 home, the mortgage will be $90,000. Your loan-to-ratio value will be 75% because you are borrowing 75% of the house's value.

Lenders consider a loan-to-value ratio greater than 80% to be high – but not at Homesite Mortgage! We specialize in low down payment financing.


How Market Forces Impact National Mortgage Rates

Some factors determining mortgage rates are out of your control. Market forces determine overall mortgage rate levels, and they can change daily. Mortgage rates fluctuate based on economic indicators such as employment rates, inflation and the country and state's overall economic health.

Employment Growth

Mortgage rates typically decrease during recessions. A recession often occurs when layoffs and furloughs occur in abundance, causing mortgage rates to decline. For example, mortgage rates were low before the COVID-19 pandemic, but they dipped even lower when the pandemic caused multiple layoffs and furloughs across the country.


The dollar loses buying power when prices increase. This is known as inflation, and rising interest rates often come with it. Lenders typically raise interest rates to compensate for inflation. Prior to 2022, mortgage rates were fairly low because inflation was low. However, mortgage rates significantly increased when inflation surged in early 2022.


Mortgage rates usually rise when the economic outlook is positive. There's a high likelihood of rising inflation with quick economic growth and low unemployment rates. However, mortgage rates typically decrease when the economy slows down — unemployment rates rise and inflation declines.

How Does a Lender Determine Interest Rate?

A lender determines interest rates by looking at several factors and considering a loan's risk. Lenders consider their overhead costs, the borrowers' financial health, the economy and a home's overall value before determining an interest rate. Some factors — like the economy — are out of your control. However, you can control other factors, such as your credit score and debt-to-income ratio.

Ways You Can Lower Your Interest Rate

While some factors determining mortgage rates are out of your control, you can strive for the lowest interest rate by improving your financial health and choosing the right lender. Lower your debt-to-income ratio, improve your credit score and save money for a higher down payment.

Find Low Mortgage Rates With Homesite Mortgage

Naturally, the best way to lower your interest rate is to apply for a loan with Homesite Mortgage to keep your overhead costs low and find the best rates possible. We offer homebuyers competitive rates and exceptional experience. We will inform you of all your options so you can get the best loan possible and benefit from lifetime savings. Contact HomeSite Mortgage to learn more about how we can help you buy a home with the best mortgage rate possible.

Why choose Homesite Mortgage for your Home Finance?

Our licensed mortgage bankers are trained to offer intelligent mortgage advice!

Our interest rates and closing costs are low so that you’ll save more money!

Our state-of-the-art technology is designed to save you time and keep your personal information safe!

Our mortgage process is quick and easy – you’ll typically close your loan in just 18-20 business days!

Our company culture is truly consumer-focused and we guarantee your mortgage experience will be better than any other!