as a first time home buyer, how do you know you are getting the best interest rate on your home loan?

Asked by Me, San Francisco, CA Tue Nov 19, 2013

we are looking to buy our first home using the USDA 100% financing home loan in a rural area obviously. we have a credit score that is high 600 to 710 (depending on credit company). we were told (by a mortgage broker) that we can get the loan for an interest rate of 4.75%, but are wondering how do we know exactly if that is the best rate?

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Jessica Bate…, Agent, Beverly Hills, CA
Fri Jan 31, 2014
I would recommend finding a service to help you get a quote from a couple of lenders like, The Lenders Network, stay away from Lending Tree unless you want a million calls!. Good luck!
4 votes
Scott Cary, Agent, Modesto, CA
Mon Jan 20, 2014
First of all...congratulations on making the decision to buy a home AND also for qualifying with today's tougher guidelines! It's wise to do our homework! I always encourage my clients to talk to at least two lenders so that they can compare programs.

Interest rates vary slightly, but there are many other things to watch out for.

Here are a few things to consider:

Does your lender answer the phone when you call...or at least call you back in a reasonable period of time?

Is your lender personable? Do they answer your questions properly? Are the easy yo work with?

Have they explained the loan process to you so that you can relax and not stress over this already trying process?

Has your lender provided everything they told you in writing? A Closing cost breakdown will help you compare one lenders quote to another.

I work with the best lenders in the area and my goal is to help introduce you to the right lender for your situation...and the right personality that will help you have the best home buying experience.

I hope this helps you!

Scott Cary
Real estate Broker
25 years experience in delivering keys to new homeowners!
1 vote
Randall Yates, Other Pro, Dallas, TX
Tue Nov 19, 2013
You may be able to get a better rate than that. You just need to compare some GFEs from a few different lenders. You have 30 days to have multiple lenders pull credit and it counts as one hard pull, it's allowed for rate shopping.
1 vote
Christopher…, Agent, Reno, NV
Tue Nov 19, 2013
Good Morning,

Me, here is the better way to view this. I have a deep back ground in lending before I went over to the sales side of Real Estate a few years ago. I am the Broker and owner for our real estate firm. I am also just over the hill from you in the central valley. I have a couple of close people we work with both here and a really good lenders one here in the central valley who I have worked with for many years and one in Fremont. You need a HONEST and fair lender, those are more rare than you would imagine.

There are 2 issues to be concerned with, 1. is the rate, 2. is who you are working with. A good lender will provide service and save you the buyer a ton of headaches. There are always many, many questions when buying your first home so you want someone who really is service driven, which at the end of the day is what you are hiring, as opposed to a lender who is only there to collect a check will potentially cause a lot of problems and possibly money.

The APR is not a good gauge for this reason. APR is your closing costs and your rate together. The problem comes in when there is no standard formulation for APR. No one company factors it the same way, some use certain fees when others don't. Banks are not required by law to disclose half of what they do.

Rate is important in the position that someone is or trying gouging you, find someone honest and this is not an issue. That being said most lenders are fairly equal as to the rate that is provided. Rates are historic lows as opposed to the late 80's when rates were 18-22%, and in more recent years rates of 8-10% were very normal. I know it seems to be bigger than it actually is but in 5 years from now when your property is worth a lot more it will seem less important. The difference usually is experience and service. You are buying at an amazing time with great rates.

Another thought is there is a large difference in Mortgage Brokers and Mortgage Bankers. Mortgage Brokers package your file and send it to another company and basically do the work twice. The only issue with this is it removes some ability to maintain control of the file. Mortgage Bankers utilize there own processors, underwriters, doc drawers and funders, most important their own money or lines of credit so it puts you in place with the decision maker not the commission maker : ) Not to be redundant but find a Mortgage Banker who is honest and trust worthy with a great reputation, we can recommend one if you would like. Christy Stewart, which you will find on our website {link is below} is one of the top lenders in the state and takes 1st or 2nd every month in the region. She has her own personalized team who all pull together to serve.

Christopher R Raynor
1 vote
Christopher great response.

A great loan officer is part of a great team.
Flag Tue Nov 19, 2013
Diego Hernan…, , San Ramon, CA
Tue Nov 19, 2013
How do you know?

Request a written copy of their Estimated CASH to close worksheet.

Also request a Pricing sheet.

The pricing sheet varies by branch/banking institution.


4.250 @ 99.875
4.375 @ 100.00
4.500 @ 100.25

Anything below 100.00 means you are purchasing before "their" current at Par pricing for interest rate.

Anything above 100.00 means that you are purchasing above Par pricing for interest rate and money should be given back to you.

Yes I will give you my pricing sheet, bring me another banks and I'll beat it if I can. This is business,I believe in 100% transparency.

If you're interested in USDA rural any good Loan Officer can locate USDA rural territories.

4.75% is high, however the additional pricing above 100.00 will be given back in its entirety to the borrower for cash to close.

NMLS 1097859

Loan Officer at Primelending, PlainsCapital Company

1 vote
, ,
Tue Nov 19, 2013
Good morning Me,

The best way to determine if you are getting the best rate is to shop around with different mortgage Lenders. But be careful, you want to compare not only the rates but also the costs associated with the loans at the different Lenders. Different Lenders have different fee structures and you may find that a rate at one Lender, while lower than others, might cost you more in upfront fees.

Here are three key points to guide you in comparing rates and fees from one Lender to another:

1. POINTS: if the points are true “Discount” points then by paying points you are obtaining a lower interest rate with that Lender because you’re effectively paying some interest at closing and thus “discounting” your interest rate for the term of the loan. Question the Loan Originators if “Points” being disclosed to you are Discount, or not. If they ARE Discount, ask the same L.O. for the Zero-Points option. You should see a slightly higher interest rate. Traditionally when a Borrower pays ONE Discount Point (One percent of the loan amount) the interest rate is lower by .25% (assuming market conditions are stable and tranquil). Therefore, if you are quoted 3.625% 30yr Fixed with 1 Point, the ZERO Points option should be .25% higher in the rate or 3.875% 30yr Fixed.

2. FEES: Each Lender has unique fees. These include, but are not limited to, Origination fee (which can equal in some cases 1% or One Point), Bank Attorney fee (for New York purchases/refinances), Application fees, Document prep fees, Underwriting and Processing fees, and etc. When comparing fees from one Lender to another it’s important to have all the fees broken down. For example, you may have an estimate from one mortgage Lender with an origination fee of $650. But they then pile on a bunch of the smaller fees which in the end totals out to about $1500. By comparison, another lender may charge only an origination fee of $1800 but NOT the smaller fees. Get a breakdown from the Loan Officer. NOTE: These fees are separate and apart from the DISCOUNT Points described above in section 1.

3. APR: Annual Percentage Rate. The BEST way to compare fees is to check the APR. REQUIRED by Federal regulations is this: if a Loan Officer sends you a rate quote she MUST include an APR in equal font-size and immediately next to the interest rate quoted (in other words, NOT in the fine print). APR includes all the Lender’s fees added to the actual interest rate of the loan (the effective rate) and calculated over the term of the loan to derive an Annual Percentage Rate. When you compare the APR from one Lender with the APR of a different Lender that is the best way to see the difference in fees charged by each Lender. NOTE: The APR will include unique fees charged by the Lender (Application fee, Underwriting fee, etc. as cited above in section 2) AND DISCOUNT Points (if any).

Trevor Curran
NMLS #40140
1 vote
thank you so much for your detailed reply! it helps a lot. i was able to see that one lender did not put down the APR next to the interest rate. another lender did at it says 5.207%.
Flag Tue Nov 19, 2013
Heidi Roddan, Agent, Modesto, CA
Tue Nov 19, 2013
Interest rates vary depending on the type of loan you are getting. I'm happy to refer you to a great lender with whom I've done many USDA loans with. (209) 499-7897
1 vote
Annette Law…, Agent, Palm Harbor, FL
Mon Feb 3, 2014
What if Wells Fargo provided you a quote of 3.85% Wow...that's a hot rate. Then in true Wells Fargo fashion two days before closing they refuse the fails in the underwriting process. What did that cost you...and the seller....and two agents? And will Wells Fargo be held accountable for leaving you at the alter or making everyone whole? Of course not. ------------ Interest rates are important but there are issues that are MORE important. Don't derail your journey to home ownership by focusing on the wrong issue.------- Remember, verbal means fictitious. GET EVERYTHING IN WRITING..--------- You would be well advised to use the LOCAL lender your REALTOR recommends. Your Realtor will be able to spot the omissions many lenders commit in the worksheet. Those omissions traditionally mask how the mortgage broker is being compensated thus allowing leveraging the final week when you are TRAPPED. Your Realtor knows which lender has the best closure rate for folks in your situation, buying the type of real estate you want. Your Realtor will require the lender to be competitive, come in under budget, on time and without the hysteria.--------------Best of success, ------Annette Lawrence, Broker/Associate Remax Realtec Group, -------- Palm Harbor, FL------ 727.420.4041 ------
0 votes
Brian Nguyen, Mortgage Broker Or Lender, Mission Viejo, CA
Mon Feb 3, 2014
The best way to check out if you are getting the best rate and service is to check out multiple lender. You should approach this like any other product and shop around to find which deal and service best fits you. It seems that you have the scores available and I am assuming your other finances are in place as well which should allow more doors open to you. So like I said I recommend that you call around different lenders like myself to see which loan service is best for you. If you have any further questions or if you are seeking a loan, feel free to contact me. Good Luck! Brian Nguyen Sr. Mortgage Banker NMLS # 659743 Phone: 949.667.2887
0 votes
, ,
Thu Jan 2, 2014
Interest rates are historically low. Do not miss out on this great opportunity by second guessing. The price of most homes in this area are increasing fast. You may end up paying more by not making a definitive decision. Trust you instincts and I am sure you will do well.
0 votes
D'Adrea Davie, Agent, Stockton, CA
Wed Dec 4, 2013
The best way to know if you are receiving the best rate is to contact different lenders (within the same timeframe) and compare the information. Prior to choosing your lender, you'll want to compare rates and fees. The best way to compare rates among lenders is to look at the Annual Percentage Rate (APR) they charge...Not just the interest rate. The APR typically combines the interest rate and fees, so the higher the APR, the higher the costs.

I would also suggest choosing your lender before looking at homes so when you are ready to submit your offer there is no delay. Make certain that your lender is pre-approving you, rather than pre-qualifying you. Sellers are requesting Pre-Approval letters at the time that the offer is submitted. Just some extra tips to help your process go a little smoother.

D’Adrea Davie
0 votes
Dennis Evans, Agent, Clifton Park, NY
Thu Nov 21, 2013
You have to shop around like anything else.... Many people just go to one company and get quotes.... May be a good deal..... may not.....
Same goes with most things in our society.... do your homework and get the best deal...
0 votes
Scott Cary, Agent, Modesto, CA
Thu Nov 21, 2013
My recommendation to all the buyers I work with is to interview two or three local lenders...not only to compare interest rates...but the loan programs offered, additional fees charged to you as a buyer and of course the all important 'customer service' aspect that you will receive from your lender.

Take your time and ask your real estate agent who he thinks provides the best overall best service.

Good luck!
0 votes
Kevin and Ju…, Agent, Wildomar, CA
Wed Nov 20, 2013
Lots of advice/comments... short answer is that every file is different. 4.75% with no money down is historically a great deal.
0 votes
Flag Mon Nov 25, 2013
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Wed Nov 20, 2013
If you made it through all of the comments below I applaud you! There are some good answers, but none of us can know for sure if your rate is competitve or not because we don't know, among other things:

*All of the features of your application.
*The timing of the close relative to the lock.
*The day you were quoted.
*The compensation level of the loan originator. (This is set through Dodd-Frank and may disproportionately affect a lower loan amount.)

My advice is that if you've had a good working relationship with your loan agent and you've understood the process thus far (and this person has been accountable and responsive), you are likely getting a good deal. It is not possible any longer for a loan agent to steer you into a higher priced loan. He cannot realize any of the profit if he did anyway.

Rob Spinosa
0 votes
Brian Nguyen, Mortgage Broker Or Lender, Mission Viejo, CA
Tue Nov 19, 2013
The best way to check out if you are getting the best rate and service is to check out multiple lender. You should approach this like any other product and shop around to find which deal and service best fits you. It seems that you have the scores available and I am assuming your other finances are in place as well which should allow more doors open to you. So like I said I recommend that you call around different lenders like myself to see which loan service is best for you. If you have any further questions or if you are seeking a loan, feel free to contact me.

Good Luck!

Brian Nguyen
Phone: 949.667.2887
NMLS # 659743
0 votes
Annette Law…, Agent, Palm Harbor, FL
Tue Nov 19, 2013
Wow! I've been in the real estate business since 1983...and I'm confused.
You've been given an impossible task.
When you want to very best prices on the things you use, you know there is only one place to go that is most likely to deliver the very lowest price. Not every item will be the lowest, but when you walk out of WallyMart the total you paid will be less that what you could have.
When it comes to lenders, you have exactly the same choice. Starting with the MOST AFFORDABLE sources of house buying money, and highest lending standards, and ending with two sources you should NOT allow your shadow to touch, but will make money available.
1. The lowest cost is realized if someone GIVES you the money.
2. Creidit Union are the lowest cost, hands down.
3. Local Lenders GO to and call an "A" or "B" graded lender
4. Mortgage Banker
5. Mortgage Broker
6. Builder
8. Owner financing
9. Bank of America, Wells Fargo, Chase.
10. Amscott (well that may not be reasonable)

Best of success.
0 votes
, ,
Tue Nov 19, 2013
Well, it's not possible to check with EVERY lender out there that does USDA loans, so you can never know if you are getting the absolute best rate. By the time you compiled all your research, the rates would change anyway.

The rate you are being quoted does seem pretty high. As of right now, my company's 0 point rate on USDA is 3.75%. This is based on a $150,000 mortgage with a 680 middle credit score locked in for 60 days. PMAC is a nation-wide direct lender headquartered in California.

I always recommend people check with 3 or 4 sources on the same day. Start with your bank or credit union. Get a referral or 2 from friends, family, and co-workers. And ask your realtor. Also, make sure you are under contract and ready to lock something in if the opportunity presents itself. Some shady lenders will give you a low-ball unrealistic quote if they know you can't lock in right then and there.

The best deal is not always the lowest rate. Interest rates and fees are important, however, it's also important that the lender you choose can get your loan closed on time and smoothly so you don't incur extra costs or god forbid lose the home because they can't fulfill the purchase agreement. A 0% rate would be great, but if you can't close on it then what good is the quote.

Feel free to give me a call if I can assist you. I can walk you through the process so you understand everything and answer any questions you have.


Tony Grech | Mortgage Loan Originator | NMLS 977416
PMAC Lending Services, Inc.
Toll-free (855) 642-4762 | Fax (248) 945-4842 | Direct (248) 728-0078
0 votes
, ,
Tue Nov 19, 2013
Well the interest rate on our mortgage is about 3.75-4.25 for the same loan but the APR is 6.58. So maybe you are looking at the APR ? If that is the note rate it is very expensive.

If the 4.75% is the APR then they are only slightly more than us. But here is the thing. On a purchase you need to be more concerned about the lender doing a good job rather than trying to save $15 a month on the payment.

We do an excellent job, and even if we were more expensive I would recommend using us on your mortgage.

Just my 2 cents worth.

If that is the note rate, then yes they are drastically overcharging you. But then not only is our service excellent but our rates are very good too.
0 votes
Christopher…, Agent, Reno, NV
Tue Nov 19, 2013

As it pertains to a " rate hit" it means that if you have a low credit score you may still qualify for the loan but because lenders gauge lower fico's or credit scores as higher risk then you will have rate adjustments. The more the risk the higher the rate. With your Fico in the high 600's this is well within the threshold of what USDA considers to be an acceptable risk and therefore does not charge you the borrower a higher rate as a result.
0 votes
allan erps,A…, Agent, Pearl River, NY
Tue Nov 19, 2013
To get the very best interest rate you need a mid 700 FICO score, plus good debt ratio, timely payments & Convention loan with at least 20% down & mortgaging under a Jumbo type Mortgage.
0 votes
, ,
Tue Nov 19, 2013
USDA loans are not well know loans by all finance officers.
Make certain that when you are shopping that you include the APR.
4.75% may be a good interest rate, but the further away the APR goes from the quoted rate, the more you are paying for that loan in closing costs.
Shop the APR, as well as the rate.
0 votes
Rocky G.H. H…, Agent, Ripon, CA
Tue Nov 19, 2013
Simple: Check

While this may not have all the lenders, it will at the very least tell you what several lenders are offering.

I hope this helps,

Rocky G.H. Hawrysz
Broker Associate, Realtor
Prudential California Realty
(209) 444-6610 Direct
(209) 433-2000 Fax
License No. 01468373
0 votes
, ,
Tue Nov 19, 2013
What you want to do is shop around at three or four places. That is how you know you are getting the best rate.

Alex Greer
Loan Officer
NMLS #1056079

0 votes
Mandy Rodgers, Agent, Modesto, CA
Tue Nov 19, 2013
All great answers. If you need contact information for some great lenders give me a call. Currently working with the USDA program in the Central Valley, so if you have any questions, I'd be glad to help.
0 votes
Diego Hernan…, , San Ramon, CA
Tue Nov 19, 2013
What Trevor has said is very true.

APR is still used deceptively in the industry because consumers are uninformed of the costs of credit.

Ask for an explanation of APR at each inquiry. Whomever seems the most knowledgeable is a great place to start, ultimately the best rate ids not the single most important determining factor.

High 600's FICO will not receive a USDA pricing hit.
0 votes
Me, it means that if you have a low credit score you may still qualify for the loan but because lenders gauge lower fico's or credit scores as higher risk then you will have rate adjustments. The more the risk the higher the rate. With your Fico in the high 600's this is well within the threshold of what USDA considers to be an acceptable risk and therefore does not charge you the borrower a higher rate as a result.
Flag Tue Nov 19, 2013
hi diego,
can you please explain this: :high 600's fico will not receive a USDA pricing hit"
Flag Tue Nov 19, 2013
Sally Grenier, Agent, Boulder, CO
Tue Nov 19, 2013
I agree with Trevor about shopping around. But you also want to make sure you're comparing apples to apples. He's given you some good points to consider. Every lender is supposed to give you a "Good Faith Estimate" which clearly explains what the interest rate is, what points they charge, origination fees, etc. I know a few good lenders in CA. I'd be happy to refer you to some of them.
0 votes
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