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Note: while similar in title to this question, I believe I am asking something different.

I am currently shopping for a mortgage to refinance our home. I have applied with a few different banks and also a mortgage broker. I am essentially looking at the same product everywhere, with the main variables in my opinion being:

  • Interest rate
  • Closing costs

It is pretty straight forward to compare closing costs between the lenders, however, I am not sure how I would compare interest rates? They are apparently not "locked in" until one is further into the process. The lenders tell me that their interest rates fluctuate several times per day, so it seems that it is just a matter if what time of the day I ask, and I will get a different answer.

Is there an actual way of figuring out which lender will have the best interest rate, or are they all going to be essentially similar enough to where it doesn't matter that much? In that case, I would be best off choosing the lender who is easiest to work with and has the most competitive closing costs, or some other factor that is important to me?

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Is there an actual way of figuring out which lender will have the best interest rate, or are they all going to be essentially similar enough to where it doesn't matter that much? In that case, I would be best off choosing the lender who is easiest to work with and has the most competitive closing costs, or some other factor that is important to me?

The short answer is: You likely have to inquire with multiple lenders to find out. The variance in rate/closing costs can be significant.

What I've done recently is get quotes from several prospective lenders, lock in the best rate/closing cost combination, then shop that offer around with the other lenders (I was getting daily updates for a while). Nothing about locking my rate obligated me to proceed with that lender.

The only reason I took a more aggressive approach with shopping around and hunting daily rate differences is that I have multiple loans to refinance and wanted to see if there was much variance/flexibility. Based on my recent experience, I'd suggest comparing rates just between your original lender and a few other reputable lenders and calling it a day. The variances that I've seen from day to day have not been terribly significant other than the recent addition of the adverse market fee which was a binary event for each lender (though they each seem to have added the fee at different times). Shopping the best rates around to other lenders was not very fruitful either, I'd only do that if you have a strong preference on which lender you want to use.

If you do want to wait and see if rates drop significantly in the short term, lock in a good rate first with one lender and check back with other lenders a couple times during your lock period (just mind the deadlines). Some lenders will mitigate risk of rates dropping after you lock in by increasing their lender credit if rates drop, so that's worth asking about as well.

Another situation where it could be worth checking back over a couple days before locking in a rate is if you don't get an appraisal waiver on your initial quote. To me that was just as much about the several hundred dollar savings as it was the hassle to myself/tenants.

Make sure you get some variety in your prospective lenders (credit unions, traditional banks, online mortgage lenders, private brokers), historically I've used a local credit union but for my refinance spree Quicken loans has happened to have the best rates in most scenarios, that doesn't mean they'll have the best rates for you.

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  • "Nothing about locking my rate obligated me to proceed with that lender." This is the key - the bank is implying a level of obligation that doesn't exist. In some cases you may be able to lock in a rate for a month or more, depending on regulation, your bank, and your circumstances. Use this to your advantage. – Grade 'Eh' Bacon Oct 27 '20 at 15:23
  • Awesome, thank you for this! So me signing all these docs ("Initial Disclosures") does not mean I intent to stick with that lender? So far, they've all mentioned they won't know if they can get an appraisal waiver until they send the loan off to Fannie Mae / Freddie Mac. – Najel Oct 27 '20 at 15:28
  • @Najel I was told that Fannie/Freddie have a tool that makes an appraisal waiver decision, I got that before locking in my rates as part of my loan estimates. – Hart CO Oct 27 '20 at 15:33

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