Did an interest rate catch your attention the last time you were looking online? Maybe you’re thinking about buying a home, an investment property, refinancing, or getting a line of credit. However, why the interest rate you see online is NOT the one you’ll get is a reality most buyers face. There are many factors that determine the rate you receive, so here’s a rundown to explain why the interest rate you see online is NOT the one you’ll get from a lender.

How Interest Rates Work

Interest rates for mortgages fluctuate daily, going up or down. Freddie Mac posts the average U.S. rate every Thursday, but why the interest rate you see online is NOT the one you’ll get stems from the fact that these are averages and not tailored to individual borrowers.

Lenders Want Your Business

Mortgage lenders promote interest rates online to draw attention, but why the interest rate you see online is NOT the one you’ll get has a lot to do with restrictions and conditions not mentioned upfront. Typically, what you see is an average, and you’ll need to read the fine print to understand any requirements.

What Impacts Your Rate

A lender will consider several factors that impact your interest rate. These include:

• Credit Score: A high credit score means a lower rate, while a lower score results in a higher rate.
• Down Payment: The more you put down, the lower the rate since your loan is less risky to the lender.
• Type of Property: Condos, for example, typically have higher rates than single-family homes.
• Different Mortgage Products: Various loan types like FHA, VA, or jumbo loans will come with different rates.
• Loan Term: Shorter loan terms, such as a 15-year mortgage, usually have lower rates than 30-year terms.
• Loan Size: Larger loans often come with higher rates.

Understanding these variables helps explain why the interest rate you see online is NOT the one you’ll get when you sit down with a lender.

Bonus Secret: APR!

When comparing lenders, always look at the APR (Annual Percentage Rate). It includes fees such as closing costs and points, giving you a clearer picture of the actual cost of the loan. While one lender might offer a lower interest rate, another could have a better APR. This is another reason why the interest rate you see online is NOT the one you’ll get, because the real costs may differ when all factors are considered.

Feel free to reach out with any questions about rates or if you need help comparing lender offers!