Lowest mortgage rates are the number one selling point for just about every mortgage company. How can every company you talk to say they have the lowest rates? Because they use rates to get you in.

Just once it would be nice for a mortgage company to say, “yeah our rates are ok. You could probably do better somewhere else.”

Note: Read Our Top Five Mortgage Complaints!

Yes mortgage companies low ball rates to get you in but that is another topic. This is about how they get their rates and how it affects you.

The problem is the lowest mortgage rates for one company are not the same as the lowest for another. And the lowest mortgage rates you can get for your situation are not the same as the lowest someone else can get. So, it becomes a little daunting.

The First Vital Factor in Getting the Lowest Mortgage Rates

The first thing a low rate depends on is the origin of the money. That is called a wholesale lender. Every mortgage company you talk to will have to get their money, and therefore their rates, from a wholesale source. Even the big companies and banks have a wholesale division. The wholesale cost for the money is different for every wholesale lender. If they want to make a bigger spread off the rate, then their rates will be higher. That means the mortgage company using them will have higher rates.

You can't pick your own wholesale lender because you have to go through a retail division or company. But now you know why rates are so different.

The source of the rates are different.

The Second Vital Factor in Getting the Lowest Mortgage Rates

The second thing a low mortgage rate depends on is how much the retail mortgage company is making off the rate. The wholesale side makes money off the rate and the retail side also makes money off the rate. The retail side is the originating mortgage company you deal with and that includes banks and brokers.

The money a broker makes off increasing the rate is yield spread premium and for a bank it is called service release premium. Lowest mortgage rates depend on how much that company is going to make. The lower the rate, the less they make.

The lowest mortgage rates also depend on what other costs you pay. If you are not paying an origination fee, the mortgage company will increase your rate to pay that in addition to the money they already were making off the increased rate.

To get the lowest mortgage rates, you have to pay all your costs including the origination fee. Many mortgage companies do not have an origination fee in their estimate because that can be a really big number. When you see your mortgage loan amount is increasing by thousands of dollars for the origination fee, you freak out. But if you want the lowest rate, you have to pay the costs upfront.

Not very exciting right? But that is how it works.

The Third Vital Factor in Getting the Lowest Mortgage Rates

The third thing a low rate depends on is your own situation. When you are planning on refinancing or buying, there is no shortage of rates splashed everywhere. But these days, mortgage rates are very specific to your situation. The rate someone advertises will probably not be the rate you end up with because there are so many variables.

When you compare mortgage rates, you have to give these companies quite a few pieces of data so they can give you an accurate quote. We have a rate quote service and yes there are quite a few questions on it. But every question is imperative to getting the right rate quote.

The less information you give, the less accurate the rate quote will be.

There are adjustments or add ons for credit score, equity position, and loan purpose. An add on can be paid upfront as part of your closing costs or the rate can be increased to pay for it. Most companies just increase the rate to pay the add ons without telling you about it. If you want the lowest mortgage rates, you will have to ask the originator what add ons or adjustments you have according to your situation. Then you have to pay them upfront and not use the rate to pay them. These three things also apply to getting the lowest FHA or VA mortgage rates too.

If you would like to get a rate quote from our service, click here.

When you decide on a company, read our post on the rate lock portion. Anyone can verbally tell you a rate or slap one on an estimate but locking is another matter entirely.

The only way you get the lowest mortgage rates is if you actually lock them in!

Good Luck!


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