What to compare when you look at mortgage rates
Comparing mortgage rates means looking at three things at once: the interest rate itself, the annual percentage rate (APR), and the fees the lender charges. The interest rate is what you pay on the loan balance. The APR includes the interest rate plus closing costs spread across the loan term, so it shows the true yearly cost. Fees vary widely—some lenders charge $500 to $2,000 in origination fees, appraisal fees, and title insurance, while others charge less.
You cannot pick the lowest rate alone. A lender with a 6.5% rate and $1,500 in fees may cost you more over 30 years than a lender with a 6.7% rate and $400 in fees. The APR helps you see this, but you still need to do the math yourself because APR assumes you keep the loan for the full term—and most people refinance or move within 7 to 10 years.
The loan term also changes the rate. A 15-year mortgage typically has a lower rate than a 30-year mortgage from the same lender, because the lender's risk is lower. A 7/1 adjustable-rate mortgage (ARM) usually starts lower than a fixed rate, but the rate rises after 7 years. Know which type you are comparing before you look at the numbers.
Key Takeaways
- Compare the APR, not just the interest rate, because APR includes fees and shows the true yearly cost of borrowing.
- Get rate quotes from at least three lenders—banks, credit unions, and mortgage brokers often quote different rates for the same loan type.
- Ask each lender for a Loan Estimate within three days of applying; federal law requires them to provide one, and it shows all fees in one place.
- Lock your rate in writing once you find a lender you want, because rates change daily and a verbal promise does not protect you.
- Use an online mortgage calculator to see how a 0.5% rate difference affects your monthly payment and total interest paid over the life of the loan.
Where to get rate quotes
Banks, credit unions, and mortgage brokers all offer different rates. Banks are large institutions like Chase or Bank of America. Credit unions are member-owned and often charge lower fees, but you have to be a member or join to borrow. Mortgage brokers work with multiple lenders and can shop your application around, which sometimes surfaces better rates than you would find on your own.
Online lenders like Better.com, Rocket Mortgage, and LendingTree let you get a quote without a phone call, though you will still need to provide income, credit, and property details. Some online lenders have lower overhead and pass savings to you; others charge the same as traditional lenders. The speed varies too—some close in two weeks, others take four to six weeks.
Start with at least three quotes. Call your current bank or credit union first, because they may offer a loyalty discount. Then get quotes from one mortgage broker and one online lender. Ask each one for the same loan type—same down payment percentage, same term, same property type—so the numbers are actually comparable.
What to ask for in writing
Do not rely on a phone quote or an email with just a rate. Within three days of submitting an application, federal law requires lenders to send you a Loan Estimate. This is a three-page form that shows the interest rate, APR, all closing costs broken down by line item, and the monthly payment. It is the only document that lets you compare apples to apples.
The Loan Estimate also shows whether the rate is locked or floating. A locked rate means the lender guarantees that rate for a set number of days—usually 30, 45, or 60. A floating rate means the rate can change until you lock it. If rates are rising, lock early. If rates are falling, you may want to float longer, but understand that you risk the rate going up instead.
Ask the lender how long the rate lock lasts and whether there is a fee to extend it. Some lenders lock for free; others charge 0.25% to 0.5% of the loan amount to extend a lock past the initial period. Ask also whether the lock covers the APR or just the interest rate—a few lenders will lock the rate but let fees change, which defeats the purpose.
How to use an online calculator to see the real difference
A 0.5% difference in rate sounds small, but it changes your monthly payment and total interest significantly. Use a mortgage calculator on Bankrate, NerdWallet, or your lender's website. Enter your loan amount, down payment, term, and the interest rate from each Loan Estimate. The calculator shows your monthly principal and interest payment, your total interest paid over the life of the loan, and your total cost.
For example, on a $300,000 loan at 6.5% over 30 years, your monthly payment is about $1,896. At 7%, it is about $1,996—$100 more per month, or $36,000 more over 30 years. Now add the closing costs from each Loan Estimate. If Lender A charges $1,200 in fees at 6.5%, and Lender B charges $2,000 in fees at 6.8%, the calculator helps you see which one costs less when you factor in both the rate and the fees.
This math assumes you keep the loan for 30 years, which most people do not. If you plan to sell or refinance in 7 years, divide the closing costs by 7 to see the annual cost, then add that to the yearly interest cost. This shifts which lender is actually cheaper for your situation.
When to lock your rate and what that means
Rate locks are binding. Once you tell the lender to lock your rate in writing—usually by signing a form or clicking a button in their online portal—that rate is yours for the lock period, even if market rates rise. The lender cannot change it. You also cannot change it if rates fall, unless you pay a fee to float down (and not all lenders offer this).
Lock your rate when you are ready to move forward with that lender and you have decided on the loan terms. Do not lock too early—if you lock 60 days before closing and the process takes 75 days, your lock expires and you have to renegotiate or pay a fee to extend. Lock close enough to closing that you have time to finish underwriting and inspections, but not so far out that you risk the lock expiring.
If rates drop after you lock, ask the lender about a float-down option. Some lenders let you lock in a lower rate once during the loan process at no cost. Others charge a fee, usually 0.25% to 0.5% of the loan amount. A few do not offer it at all. Ask before you lock so you know your options.
Red flags when comparing rates
If a lender quotes a rate that is much lower than everyone else, ask why. Sometimes it is because they charge higher fees, sometimes because the quote is not for the same loan type, and sometimes because the quote is not real—it is a teaser rate that applies only to borrowers with excellent credit and a large down payment. Ask the lender to confirm the rate applies to your specific situation: your credit score range, your down payment percentage, your debt-to-income ratio, and your property type.
Be wary of lenders who pressure you to lock quickly or who say the rate is only good for today. Rates do change daily, but reputable lenders give you time to compare. If a lender will not send you a Loan Estimate within three days, or if they refuse to lock a rate in writing, move on.
Watch for bait-and-switch on closing costs. The Loan Estimate shows estimated costs, and some costs can change slightly at closing—property taxes and insurance, for example, depend on the final appraisal. But lender fees should not change. If the final Closing Disclosure shows much higher fees than the Loan Estimate, ask the lender why and request a credit if the difference is their mistake.
How your credit score and down payment affect the rates you see
Lenders quote different rates to different borrowers based on credit score and down payment size. A borrower with a 750 credit score and 20% down will see a lower rate than a borrower with a 650 score and 5% down, even from the same lender. This is not unfair—it reflects the lender's actual risk. A lower credit score means higher default risk, and a smaller down payment means the lender has less cushion if the home value drops.
If your credit score is below 700, you may see rates 0.5% to 1% higher than the advertised rate. If your down payment is less than 10%, you will also pay mortgage insurance, which adds $100 to $300 per month depending on the loan size. These costs are real and should factor into your decision about whether to buy now or wait to save more for a down payment.
If you are on the borderline of a credit score tier—say, 699 versus 700—paying to remove a negative item from your credit report might lower your rate by 0.25% to 0.5%, which could save you thousands over the life of the loan. This is worth doing before you apply for a mortgage.
Frequently Asked Questions
How often do mortgage rates change?
Mortgage rates change daily, sometimes multiple times per day, based on bond market movements and Federal Reserve policy. Lenders set their rates each morning, and rates can shift by 0.125% or more in a single day. This is why locking your rate in writing matters—a verbal quote is not a promise.
Should I get a rate quote from my current bank?
Yes, but do not assume they will offer the best rate. Banks often give loyalty discounts to existing customers, but they also sometimes quote higher rates because they assume you will not shop around. Get quotes from at least one other lender so you know whether your bank is competitive.
What is the difference between a fixed rate and an adjustable rate?
A fixed rate stays the same for the entire loan term—30 years, 15 years, whatever you choose. An adjustable rate (ARM) starts lower but rises after an initial period, usually 3, 5, 7, or 10 years. ARMs are riskier because your payment can jump hundreds of dollars per month when the rate adjusts. Only choose an ARM if you plan to sell or refinance before the rate adjusts.
Can I negotiate closing costs with a lender?
Yes. Some lenders will credit you a portion of closing costs if you ask, or they will lower their origination fee to compete with another lender's quote. This is especially true if you have good credit and a large down payment. Always ask, and always compare the final Loan Estimate, not just the interest rate.
What does it mean if a lender says the rate is "par"?
Par means the interest rate and the lender's fees balance out—you are not paying extra points to lower the rate, and the lender is not crediting you points to raise it. Rates above par cost you more in fees; rates below par mean the lender is crediting you. Ask your lender where the rate sits relative to par so you understand what you are paying for.