Why Is My Rate Higher Than the Advertised Rate?

You saw a rate in an ad on Monday, you asked for a quote on Tuesday, and the number that came back was higher. Same lender, same week, same kind of loan, and nothing about your situation seems unusual. That gap is something clients ask me about.

Your rate is higher than the advertised rate because the ad is priced for one specific, near-perfect scenario, and your rate is that same daily pricing adjusted for your own file. The adjustments come from your credit score, your down payment, whether you will live in the home, the type of property and what the loan is for.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, NMLS #483943, through C2 Financial Corporation. I'm licensed in fifteen states. The gap between an ad and a quote feels like a bait and switch, and I understand why. It almost never is, and once you can see how the pricing is built, you can shop it properly. You can see your own scenario priced on this site, with the whole sheet showing.

The advertised rate is one line off a much bigger grid

Every morning, wholesale lenders publish rate sheets. A rate sheet is a grid rather than a single number. It lists a range of rates, and next to each one, what that rate costs or pays back in price. The lower the rate, the more it costs up front, and the higher the rate, the more comes back toward your closing costs. Where those numbers come from is a separate story that starts with the bond market.

An advertised rate is a single line pulled off that grid, priced for a scenario chosen to make the number look as good as the rules allow. That usually means an excellent credit profile, a large down payment, a single-family home the client will live in, a plain purchase or rate-and-term refinance, and often points paid up front. That scenario does exist, and it may not match your file.

The adjustments, and what each one is measuring

The industry calls them loan-level price adjustments. Each one is a pricing answer to a risk question, and the questions are the same at every lender.

Your credit profile. Pricing improves in tiers as scores rise, and the tiers are the important part. It is not a smooth slide. Crossing a tier boundary can matter more than a large move inside one, which is why working on your score before you shop pays off, while trying to do it during a contract usually does not.

The size of your down payment. Lenders measure this as loan-to-value, and it also moves in breakpoints rather than smoothly. This is why whether to put more down is worth working out with the numbers, because a different down payment can land you on a different pricing tier.

Whether you will live in the home. A home you live in prices best. A second home can carry its own adjustment, and an investment property always does.

The type of property. A condominium, a manufactured home and a multi-unit property can each carry their own adjustment. A condo is a different risk than a detached home, because the building has its own finances, its own insurance and its own reserves.

The purpose of the loan. A cash-out refinance prices above an otherwise identical rate-and-term loan, because a loan that increases how much you owe carries more risk than one that does not.

Loan features. A larger loan in the high-balance range, an adjustable rate, and a handful of other structural choices can each shift pricing.

I am leaving out what any of these are worth on purpose. The grids get revised, and a number that is right this year and wrong next year is worse than no number at all, which is the same reason I do not print VA funding fee percentages or loan limits. The way the adjustments work does not change much, while your own numbers should come from a live quote.

Why two neighbors get different rates in the same week

Stack the adjustments onto the day's base pricing and you get your rate. Two clients can close in the same week, at the same lender, on the same program, and hold different rates while both are priced exactly correctly.

That is the system working as designed, and it is much more useful to know this before you start shopping than to find it out at the quote.

The advertised rate as a shopping tool

The advertised rate is a starting point. Comparing advertised rates between lenders does not tell you much, because you cannot see the assumptions behind each one, but having your own scenario priced by two lenders on the same day does.

Rate and cost move together. The same loan, on the same day, at the same lender, is available to you at several different rates, each with a different up-front cost or credit. If somebody quotes you a single number, they have made that choice for you. The tools on this site show the whole sheet and let you choose the option that works best for you.

Some adjustments you can change and some you cannot. You cannot change that a condo is a condo. You may be able to change which side of a down payment breakpoint you land on, or whether your score has cleared a tier, and you'll want to find those out early. Getting pre-approved is where that gets specific.

An illustration, so the shape is visible

Numbers below are made up to show the mechanism. They are not a quote, and yours will be different.

Imagine an advertised rate built on a 780 credit score, 25 percent down, a single-family home you will live in, a purchase, with a point paid.

Now imagine your file: a condo, 10 percent down, a 720 score, a home you will live in, a purchase. Nothing about that is unusual or troubling. But three of the five inputs differ from the advertised scenario, each one carries its own adjustment, and they all land on the same file together.

The result is a rate that looks nothing like the ad, and it was produced by arithmetic rather than by anybody's opinion of you. If the advertised number was the only one you had ever seen, it would feel like a penalty. It is a quote for your scenario.

The three questions to ask any lender, including me

"What assumptions is that rate built on?" Credit tier, down payment, whether you will live in the home, property type, purpose, and whether points are included. A rate without its assumptions is a headline rather than a quote, and a lender should be able to state them plainly.

"What are my other rate options today, and what does each one cost?" There is never one rate available to you. There is a range, each with a different up-front cost or credit. Seeing three or four side by side means you get to pick the one that fits, and being shown only one means somebody else picked it for you.

"Which of my adjustments could actually change?" Some are facts about the transaction and are not going anywhere. Some are thresholds you might be just under. A lender who can tell you which is which is giving you something you can act on.

Those three questions move the conversation from whether the rate is fair to what is in your file, and what is in your file is the part you can do something about.

The short version

The ad shows the best number the rules allow for one scenario, and your quote is the price for your own file.

The fix is to price your actual scenario, see the whole sheet, and choose the option that works best for you. You can run your numbers with no credit pull, no account, and nobody calling you.

You can choose whichever of these fits once you are ready for the next step. You can hit Apply to start your pre-approval, call me at (843) 765-0000, or email me at jeff@solverya.com. If I sent you a personal page, the schedule button at the top of it lets you pick a time. I won't call you unless you decide you want to talk.

Nothing here is a loan approval, a denial, or a commitment to lend. Pricing changes daily and guidelines change periodically.

Common questions

Why is my mortgage rate higher than the rate I saw advertised?

Advertised rates are priced for one specific, near-ideal scenario: typically a high credit score, a large down payment, a single-family home the client will live in, a simple purchase, and often points paid up front. Your rate starts from the same daily pricing and is then adjusted for your credit profile, down payment, occupancy, property type and loan purpose. The difference is arithmetic rather than a bait and switch.

What are loan-level price adjustments?

They are pricing adjustments tied to the specifics of a loan file rather than to the market. Each one answers a risk question: how strong is the credit profile, how much equity is there, will the client live in the home, what kind of property is it, and what is the loan for. They are applied on top of the day's base pricing to produce the final rate.

Do all lenders use the same adjustments?

The major adjustment categories are common across conventional lending because they come from Fannie Mae and Freddie Mac, the agencies that buy conforming conventional loans. The exact amounts, and how a particular lender layers its own margin on top, vary. That variation is why pricing the same file at more than one lender on the same day is worth doing.

Can I avoid loan-level price adjustments?

Not avoid, but sometimes influence. Adjustments tied to property type or occupancy are facts about the transaction. Adjustments tied to credit tier or down payment breakpoints can sometimes be improved before an application, which is why credit work and down payment planning belong before home shopping rather than during a contract.

Is a lower advertised rate always the better choice?

Not necessarily. A very low advertised rate can carry points, which is money paid up front to buy that rate down. Whether that is a good trade depends on how long you keep the loan. Comparing rate alone, without the cost attached to it, compares half of each offer.

Why did two clients get different rates on the same day?

Because the rate is produced from the file, not only from the market. Different credit tiers, different down payments, different property types, different occupancy, or a different loan purpose will produce different rates on identical market pricing, and both can be correct.