You searched online for today’s mortgage rates.

Maybe you saw an advertisement on social media.

Maybe you heard something on television.

Maybe you asked an AI assistant:

“What are mortgage rates today?”

And the answer sounded pretty good.

Then you called your lender.

The rate you were quoted was higher.

Naturally, you’re wondering:

Why is my lender quoting me a rate in the 6s when the internet says mortgage rates are in the 5s?

That’s a great question.

The short answer is:

Mortgage rates aren’t universal.

The rate you see advertised online, reported in the news or displayed as a national average may not be the rate available for your specific mortgage.

Your mortgage rate can be affected by the loan you’re requesting, the property you’re financing, your financial profile, current market conditions and the cost associated with obtaining that particular rate.

And sometimes that really attractive rate you’re seeing online comes with a price.

So, before assuming your lender is expensive, let’s figure out what you’re actually comparing.

Quick Answer: Why Is My Mortgage Rate Higher Than What I See Online?

There are many variables that can affect mortgage pricing.

Depending on the loan and program, those may include:

Your credit profile.

Your down payment.

Loan to value, or LTV.

Loan amount.

Property type.

Occupancy.

Loan purpose.

Loan program.

Debt to income ratio, depending on the loan and pricing structure.

Whether you’re purchasing, refinancing or taking cash out.

Whether you’re financing a single family residence, condominium, manufactured home, second home or investment property.

The length of your rate lock.

And whether you’re paying discount points to obtain the advertised rate.

That’s why:

“What’s today’s mortgage rate?”

sounds like a simple question, but usually needs more information.

A better question might be:

“What mortgage rate and cost are available for my specific situation?”

But I Saw on the News That Mortgage Rates Were Lower

Here’s where things can get confusing.

Sometimes the financial news is talking about mortgage rates.

Sometimes they’re talking about the Federal Reserve and the federal funds rate.

Those aren’t the same thing.

The Federal Reserve does not directly set your 30 year fixed mortgage rate.

You’ll also frequently hear national mortgage rate averages reported in the media. Those are useful for understanding the general direction of the market, but they’re still averages.

For example, Freddie Mac publishes a widely followed weekly mortgage rate average using mortgage application data fitting specific criteria. That does not mean every borrower in America should expect to receive that exact rate.

Your mortgage might be FHA.

VA.

Conventional.

Jumbo.

An investment property.

A condominium.

A refinance.

A different down payment.

A different credit profile.

Or simply a completely different scenario than the mortgages represented by the average you’re reading about.

Average mortgage rates are a useful market benchmark. They are not a personalized mortgage quote.

“Okay, Doug. But This Website Really Does Say 5.49%.”

Great.

Now we’re going to ask one of my favorite questions:

What does 5.49% cost?

The mortgage rate and the price of obtaining that rate are two different things.

On the same mortgage, you may have several rate options.

You might pay additional money upfront to obtain a lower rate.

You might choose a somewhat higher rate with lower upfront lender costs.

Depending on the transaction, there may also be lender credit options.

This is where discount points enter the conversation.

What Are Mortgage Discount Points?

Discount points are upfront charges associated with obtaining a lower mortgage interest rate.

The math is simple:

One discount point equals 1% of your loan amount.

So, let’s use a $400,000 mortgage.

1 point = $4,000.

Suppose paying that additional $4,000 lowers your monthly principal and interest payment by approximately $80.

Your simple breakeven calculation would be:

$4,000 ÷ $80 = 50 months

That’s a little over four years before the accumulated monthly savings equal the $4,000 you paid upfront.

Does that mean paying the point was a bad decision?

No.

Does it mean it was a good decision?

Not necessarily.

We need another piece of information:

How long do you expect to keep this mortgage?

If you’re likely to keep that mortgage for 10 years, paying additional money upfront for a lower rate may deserve serious consideration.

But what if you sell the house in three years?

What if rates fall and you refinance in 18 months?

You may never reach your original breakeven point.

That’s why I don’t automatically recommend buying the lowest rate available.

First, I want to know what the lower rate costs and how long it may take you to benefit from paying for it.

Where Can I See Whether I’m Paying Points?

Pull out your Loan Estimate.

Go to Page 2.

Find:

Section A: Origination Charges

This is one of the first places I want you to look when comparing mortgage offers.

This section shows lender origination charges and is also where you’ll find discount points when they are being charged for a reduced interest rate.

Depending on the lender and transaction, Section A may also contain other lender charges.

That’s why I don’t want you looking only for the word “Points.”

Look at the entire Section A.

Let’s say:

Lender A offers 5.75%.

Lender B offers 6.00%.

At first glance, Lender A appears to have the better deal.

But what if Lender A has $8,000 more in Section A?

Now we have something worth analyzing.

The 5.75% option may still be better.

Or it may not.

We need to determine what you’re paying for the lower rate and how long it takes to recover that additional cost.

What About Lender Fees?

This is another area where borrowers can get tripped up.

Points aren’t the only lender costs worth comparing.

One lender might charge no discount points but have higher lender fees.

Another lender might charge points but have lower fees elsewhere in Section A.

That’s why, when I’m comparing two Loan Estimates, I’m interested in the entire Section A, not simply the interest rate or one individual charge.

And we also need to distinguish lender charges from other expenses associated with closing a mortgage.

Title charges, appraisal costs, homeowners insurance, property taxes, prepaid interest and money going into an escrow account aren’t necessarily lender fees.

If one Loan Estimate shows higher property taxes or a larger initial escrow deposit, that doesn’t automatically mean that lender is more expensive.

Compare lender costs with lender costs.

“Another Lender Gave Me a Lower Rate.”

I hear this one.

My response is pretty simple:

Great. Let’s look at it.

I’m not being sarcastic.

If somebody offered you a better mortgage, I want to understand it too.

But don’t send me a screenshot that only says:

5.75%

Send me the Loan Estimate.

Now we can compare:

The loan amount.

Loan program.

Interest rate.

APR.

Discount points.

Section A lender charges.

Lender credits.

Monthly principal and interest.

Mortgage insurance, if applicable.

Estimated total payment.

Cash to close.

Rate lock.

And whether we’re actually comparing the same type of mortgage.

That’s a mortgage comparison.

Comparing 5.75% with 6.00% by itself isn’t.

Then There’s That Letter in Your Mailbox…

You’ve probably seen one.

You get home from work and open the mailbox.

There’s a letter telling you:

IT’S TIME TO REFINANCE!

And right there in big letters:

4.99%

Wait a minute.

You’ve been hearing mortgage rates are somewhere in the 6% range.

4.99% sounds fantastic.

So, you keep reading.

Somewhere else you notice another number:

APR: 6.0%

And maybe you’re thinking:

Six percent APR? That’s still pretty good. My credit card is charging me 27% APR.

Okay.

This is where I want you to stop for a second.

Remember this article.

And let’s look a little closer.

Why Does the Advertisement Say 4.99% but the APR Is 6%?

Your mortgage interest rate and APR aren’t the same thing.

The interest rate is used to determine the interest charged on the principal balance and helps determine your principal and interest payment.

APR stands for annual percentage rate.

APR is a broader measure of the cost of borrowing because it incorporates the interest rate along with certain other finance charges associated with obtaining the mortgage.

That’s one reason your mortgage APR will generally be higher than your note rate.

So, if you see:

Interest rate: 4.99%

APR: 6.00%

I don’t immediately want you thinking:

Great deal.

But I also don’t want you thinking:

Bad deal.

I want you thinking:

What does the 4.99% cost?

How many points are required?

What are the lender fees?

What loan amount is assumed?

What credit profile is required?

How much equity or down payment is assumed?

What property type?

What occupancy?

Purchase or refinance?

Cash out or rate and term?

Fixed rate or adjustable?

What lock period?

And are there other qualifications buried in the fine print?

The advertisement did its job.

It got your attention.

Now let’s figure out what the mortgage actually costs.

“But My Credit Card Is 27% APR. Isn’t a 6% Mortgage APR Obviously Good?”

Not necessarily.

We’re comparing two very different financial products.

A revolving credit card and a mortgage secured by real estate have completely different structures, costs, repayment terms and risks.

The fact that your Visa charges 27% APR doesn’t tell us whether a mortgage with a 6% APR is competitive.

Instead, compare that mortgage against other comparable mortgage options available for your situation.

Interest Rate or APR: Which One Should I Look At?

Both.

Your interest rate matters because it affects your principal and interest payment.

APR provides another way to evaluate the cost of borrowing because it includes certain finance charges in addition to the interest rate.

But I wouldn’t choose a mortgage based on APR alone either.

Instead, I want to understand three things:

What am I paying upfront?

What will I pay every month?

How long do I expect to keep this mortgage?

Those three questions can tell us quite a bit.

How Do I Compare Two Mortgage Loan Estimates?

First, make sure we’re comparing similar loans.

Same loan amount.

Same loan program.

Same down payment.

Same property.

Same occupancy.

Similar lock period.

And ideally quotes obtained at approximately the same time.

Mortgage markets move.

Comparing a quote you received Monday with another quote you received Friday may not tell you which lender was actually more competitive.

Then look at the Loan Estimates.

Page 1

Look at the loan amount, interest rate, principal and interest payment, estimated total payment and estimated cash to close.

Page 2

Look closely at:

Section A: Origination Charges

This is where we’re looking for discount points and other lender origination charges.

Also look for lender credits elsewhere on the Loan Estimate.

Then look at the remaining costs so you understand what’s contributing to the total amount required at closing.

Page 3

Look at the Comparisons section, including APR.

Now you’re looking at an actual mortgage offer instead of an advertisement.

Is the Lowest Mortgage Rate Always the Best Deal?

No.

But that doesn’t mean the higher rate is automatically better either.

Sometimes paying points for a lower rate makes financial sense.

Sometimes preserving your cash makes more sense.

Sometimes a lender credit may be useful.

Sometimes a zero point option lands exactly where you want it.

And sometimes the lender advertising the lowest rate really does have the better mortgage.

We won’t know until we compare the numbers.

That’s why I don’t think your first question should always be:

“What’s your lowest rate?”

I’d rather start with:

“What Am I Trying to Accomplish?”

How much cash do you want to bring to closing?

What monthly payment are you comfortable with?

How long do you expect to own the home?

How long do you realistically expect to keep this mortgage?

Do you need to preserve cash after closing?

Would paying more upfront significantly improve your monthly payment?

Once we understand the goal, we can decide which combination of rate, cost and payment makes sense.

Frequently Asked Mortgage Rate Questions

Why is my mortgage rate higher than what Google or AI says today’s mortgage rate is?

Online mortgage rates are often national averages, advertised rates or examples based on particular borrower and loan assumptions. Your actual rate can depend on your credit profile, down payment, LTV, loan program, property type, occupancy, loan purpose, lock period and other factors.

A national mortgage rate is a benchmark. It isn’t a personalized quote.

Why is my mortgage APR higher than my interest rate?

Your interest rate reflects the rate charged on the amount borrowed. APR is a broader measure that also incorporates certain finance charges associated with the mortgage, which is why APR is generally higher than the note rate.

A large difference between the interest rate and APR is a reason to look more closely at the loan’s points, fees and terms.

How do I know if I’m paying mortgage points?

Look at Page 2, Section A: Origination Charges of your Loan Estimate.

If you’re paying discount points for a reduced interest rate, they should be disclosed there. Remember that one point equals 1% of your loan amount, so one point on a $400,000 mortgage equals $4,000.

Is it worth paying points to lower my mortgage rate?

It depends on the cost, monthly savings and how long you expect to keep the mortgage.

For example, if you pay $4,000 and save $80 per month, the simple breakeven point is approximately 50 months. If you sell or refinance before then, you may not recover that upfront cost through the monthly savings.

Where are lender fees shown on a Loan Estimate?

Start with Page 2, Section A: Origination Charges.

This is where you’ll find lender origination charges, including discount points when applicable. When comparing lenders, don’t compare only the points. Compare the entire Section A and make sure you’re looking at similar loan scenarios.

Why can two people buying similarly priced homes get different mortgage rates?

Because mortgage rates aren’t universal.

Two borrowers purchasing $500,000 homes could have different credit profiles, down payments, LTVs, loan programs, property types, occupancy, loan amounts, lock periods or other characteristics that affect pricing.

Same purchase price does not necessarily mean same mortgage rate.

Is the mortgage rate advertised online the rate I’ll actually receive?

Not necessarily.

Advertised rates may be based on specific assumptions and may require a particular credit profile, down payment, loan amount, property type or payment of discount points.

Read the assumptions and disclosures, and compare the advertised offer with the actual Loan Estimate you receive.

Should I choose the lender with the lowest APR?

APR is useful when comparing mortgage offers, but it shouldn’t necessarily be the only factor in your decision.

Consider the interest rate, points, lender fees, monthly payment, cash to close and how long you expect to keep the mortgage. A mortgage with higher upfront costs may look different depending on whether you expect to keep it for two years or twenty.

Already Have a Loan Estimate?

Send it to me.

I’ll help you understand the interest rate, APR, discount points, lender fees, monthly payment and estimated cash to close.

I’m not going to tell you another lender’s offer is bad simply because it isn’t mine.

If it’s a good deal, I’ll tell you.

If there’s something you should understand before making the decision, I’ll point that out too.

Because my job isn’t simply to put the lowest interest rate I can find on a piece of paper.

My job is to help you understand what that rate costs, what you’re getting for that money and whether it fits what you’re trying to accomplish.

Don’t compare rates. Compare mortgages.

Mortgage Guidance. Not Mortgage Pressure.