Although lenders get interest rates from the same place (mortgage interest rates are largely based on mortgage backed securities sold on the bond market), they can vary from lender to lender. There are a few reasons for this.
Top Three Reasons Interest Rates Vary
Lack of Full Disclosure
This is the most common reason I see a variance in interest rates. When you are comparing lenders you must compare apples to apples! That means getting a loan estimate from the lenders you are comparing on the same day, and ensuring all the fees are present. The number one thing to look out for is the cost (This has many names- points, discount, buy down, origination, etc) of the rate offered. Also, be sure its the same program and product. Then you can see if the lower rate really is a good deal. If you are comparing me to another lender I will help you with this!
Buying Market Share
Sometimes lenders, especially big banks, will try to win a portion of the market and keep current customers. One way to do this is to run a special for a limited period of time, on a limited number of products. For example, a lender might offer a 30 Year Fixed loan for .5% lower than the rest of the market and make little to no money on the loan. To make up for that the lender may hike up interest rates after the promotion is over. It is wise to read the fine print with a discerning eye. Also keep in mind you will not get the service you get with a dedicated Mortgage Banker like myself who values their relationship with you. If you have a question about an offer like this I am always happy to help!
Niche Pricing
Some lenders build their business on certain mortgage products. Their pricing for those products may be undercutting the market, whereas their interest rates and/or fees will be higher on other products. One example of this is a lender who specializes in “Jumbo” loans. Those are loans over $560,000 in Washington state. This lender might have awesome rates on a large Jumbo loan, but higher interest rates on a Conventional loan amount.
Tune in below for more on how you can be sure you’ve got a good deal.