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Which lenders offer the lowest mortgage rates?

Peter Warden
The Mortgage Reports contributor

Who offers the lowest mortgage rates?

Let’s hope you’re not expecting a short list of a few lenders who always offer the best mortgage rates in the market. Because you’ll be disappointed.

The market simply doesn’t work that way. Different lenders often specialize in different types of mortgages for a specific class of borrowers. And the same lender can offer highly competitive rates one day and expensive ones the next.

The good news is that you can increase your chances of getting a very low rate by supplying your request to multiple lenders on the same day. This will give you a side-by-side comparison of all offers, and choose the best one.

Ready to get started?

Start shopping for your best mortgage rate here. (Nov 20th, 2018)

In this article:

When shopping for a home loan, most consumers surveyed say that their priority is to find the lowest mortgage rates. But no single lender or group of lenders consistently offer the best rates to every applicant or for every program.

  1. To find your best deal, get quotes from several mortgage lenders for the same loan product
  2. To get accurate and meaningful quotes, supply all lenders with the same information
  3. Lenders provide either a Loan Estimate disclosure or a worksheet showing the loan’s rate and costs

Understand that no interest rate is guaranteed until you apply for your mortgage and lock it in.


Lenders that specialize

Of course, some mortgage lenders pride themselves on being generalists. They strive to satisfy the needs of most would-be borrowers.

Related: Pros and cons of different types of homes

But many lenders are specialists. Each of those has become adept at helping a particular group of consumers or providing a particular type of mortgage or lending against a distinct category of property. So a company may, for instance, concentrate on one or more of the following:

  • First-time buyers
  • Co-ops
  • VA or USDA loans — mortgages backed by the Veterans Administration or the United States Department of Agriculture
  • People with bad credit
  • People with great credit
  • Manufactured homes
  • Homes in retirement communities
  • Jumbo loans — extra large home loans that Fannie Mae, Freddie Mac or government agencies won’t back

A lender can choose to specialize in any way it wants. Some conform to guidelines set by Fannie Mae or Freddie Mac (they are called “conforming” loans), others are funded by investors who buy them and make their own rules.

“Portfolio” lenders don’t sell their loans to investors at all. They keep their mortgage on their own books, assuming all the risk of default, and can, therefore, offer the most creative programs of all.

Pipeline management

Industry insiders call the flow of new business “the pipeline.” And each lender opens and closes the valves on its pipeline to suit its business needs.

So, when it has plenty of funds to lend but its staff members are idle, a lender opens the valve by reducing its mortgage rates. That gets in new business and keeps its people busy.

But when a lender is operating at full or near-full capacity, it needs to stem the flow of new business. So it closes or slows its pipeline by raising its rates. That means the same lender can one day be among those offering the lowest mortgage rates, but 24 hours later have relatively high ones.

No such thing as best or cheapest lender

All this means you can’t rely on a particular company to fulfill your needs, even if it seemed the perfect choice sometime in the past.

It may be that your personal circumstances have changed. Perhaps you’re no longer a first-time buyer, or your credit is better or worse than it once was, or you’re now wanting to buy a vacation home or a manufactured one. A once-perfect lender could now be among the worst for someone in your current situation.

Similarly, the lender itself may now have a different offering. It may have closed or opened its pipeline.

How much can you save with the lowest mortgage rates?

Most days, there are wide variations in the mortgage rates available. The same borrower, with the same credit, buying the same home on the same day might be offered a rate of 4.5 percent by the best lender and 5.0 percent by the least competitive.

Related: The 10 factors that affect your mortgage rate (and what to do about them)

Of course, the actual rate will vary depending on how markets are faring, but that sort of 0.5-percent spread is commonplace.

In 2015, federal regulator the Consumer Financial Protection Bureau issued a report about getting the best mortgage rate for a $200,000, 30-year, fixed-rate mortgage.

The CFPB guessed that getting a .5 percent better rate would save about $60 a month. “Over the first five years,” said the CFPB, “You would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, even while making lower payments.”

Adjust the savings up or down if you’re borrowing more or less than that. Either way, the amounts are substantial.

How to find the lowest mortgage rates

That CFPB report revealed the only way to be sure you’re getting a truly competitive rate: You have to shop around for the best deals. It said that you stand to “save thousands” by shopping with at least three lenders.

Related: How to decipher the stack of mortgage loan disclosures from your lender

Yet a CFPB survey related to the report revealed some shocking statistics:

  • Very nearly half (47 percent) of respondents said they considered only one lender or broker
  • A whopping 77 percent completed only one mortgage application instead of applying to multiple lenders and getting multiple quotes
  • A nearly-as-troubling 70 percent said they relied for advice on the people (brokers, lenders, real estate agents) selling to them

And this for one of the biggest transactions most of us ever make!

Step-by-step

Here’s how to be sure you’re getting a good deal:

  • By all means, start with your existing mortgage lender and bank. But never stop there
  • Get quotes from multiple other lenders — It’s easy to find suitable lenders online. Three is just a minimum. So, feel free to go for more

Related: Don’t fear multiple credit inquiries when mortgage rate shopping

  • Don’t worry about your credit score — providing you make all your applications within a couple of weeks, your score will take the same small hit for multiple applications as it will for one.
  • Fill in application forms truthfully, carefully and consistently — you’ll only get caught out later if you lie or make errors. And your quotes won’t be comparable if you provide different information to different lenders.
  • Study closely the loan estimates or spreadsheets lenders send you, but don’t worry about what they call each fee — it’s the total that counts.

Remember that you can comparison shop with mortgage lenders right up until the time you lock your interest rate. So before making that commitment, take a few minutes to check with other lenders, providing your FICO score, purchase price (or home value if it’s a refinance), and desired loan amount and program.

Finally, note that it’s easier to compare offers from multiple lenders if you fix one of the variables. It’s hard to tell if it’s better to pay $3,000 in fees for a $100,000 loan at 4.25 percent, or $750 for a $100,000 loan at 4.615 percent. But if you tell all lenders you want to know the cost of a loan at 4.25 percent, the lender with the lowest cost wins.

Verify your new rate (Nov 20th, 2018)