Most first time homebuyers believe the best way to choose a lender is to pick an institution that offers the lowest interest rate. This will affect both an individual’s short-term and long-term financial condition since it will determine the monthly mortgage payment and the total amount one has to pay for his or her house.

However, buying a house is a major financial decision, let alone obtaining a mortgage. Because a home loan is surrounded with potential pitfalls, especially for first timers. When purchasing a house, interest rate is the sole factor a buyer should consider when looking for a mortgage.

But low interest rates are not always a bargain. Here’s why.

Teaser Rates

Lenders often advertise low interest rates in order to entice people, but mortgage rates change more than once in a day. In case you want to avail the interest rate being advertised, most likely you won’t get the same small rate.


Aside from the rate, a lot of costs are associated with securing a mortgage such as closing costs. Closing costs pertain to the expenses over and above the property’s price. Although banks can charge a low interest rate, they might expect you to pay double the closing costs. Lenders neutralize the low rates by charging higher fees to borrowers. Unfortunately, details about these rates are not indicated outright. The only way to find out about these charges is to talk to a lender and ask for a good, honest estimate.


The loan you qualify for affects the interest rate. Most of the time, the advertised rate may not be applicable to all types of loans. It is advisable to ask the lender about the loan and the requirements to avail of the mortgage.

Credit Score

Lenders grant loans to individuals with highest credit scores. If the score is below 720, there is a small possibility you won’t obtain a rate similar to the advertised rate because most lending institutions around rely on this scoring system to determine the potential borrower’s financial situation. So, to get a high credit score, take note of your debt obligations and pay on time.

Lending Institution Reputation

How to know the reputation of a lending institution? Do your homework. Research about the lender and determine how likely you can score a fair deal when working with that firm. Remember, lenders who give the best rates won’t always give a good deal.

Loan Representative

Not all unethical loan representatives work in fly-by-night companies, and people who put the interest of the clients above anything else can work for shady institutions. On that note, you should be particular when it comes to choosing the person handling your mortgage for you. He or she has to be someone you trust, and should be competent and professional. Same with finding an established lender, research about this representative and his or her standing in the company.