A common misconception is that all mortgage companies (lenders, brokers, banks) have the same mortgage rates. Wrong. The issue with this misunderstanding is that a borrower may accept the first offer they receive. Because they did not shop around, they may not be getting the best offer out there.

You are probably wondering, “Why would mortgage companies have different interest rates? I thought they were all the same.” 

While most lenders likely have rates in a general range of one another, the actual interest rate and corresponding fees can vary quite a bit across different institutions. Just like any other product you buy, mortgage companies can determine how much profit they want to make on a loan. 

Since mortgage companies have varying expenses and compensation structures for their loan officers, the profit they require is reflected in the interest rate they charge. In other words, that mortgage company with the big, opulent office building and super highly-compensated loan officers would need to charge a higher rate to offset those higher expenses.

In addition to interest rates, lenders often make money off of other fees like origination, application, commitment and underwriting. It is extremely important to take this into consideration as well when making your decision on what lender to choose. 

Always remember to get a second opinion, and contact more than one lender when making your decision on who to work with since rates and fees can vary considerably across different lending institutions.

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