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  • Lowest Interest Rate or Lowest Closing Costs?

    Plus NO Lender Fee, NO Closing Costs, No Origination Fee Mortgages. How do they all work?

    A common mistake mortgage loan shoppers make is to ask: "What's your lowest interest rate?" or "What are your closing costs?"

    Both logical questions to ask, but they do not give the response most borrowers need to make a proper decision. Borrowers must understand both interest rates and closing costs, and how they interact with each other.  Interest rates are only half the answer to getting the best mortgage deal. It is possible end up with a low rate, or with low or no closing costs, but not necessarily the best deal.

    First understand that ALL LENDERS have essentially the exact same real closing costs to provide you a mortgage loan.

    This includes appraisal, credit report, state taxes, county recording fees, title company charges, etc.  Mortgage companies also have to pay the same loan officers, underwriters, processors, and back office staff, so they all need to charge origination fees, processing fees, etc.

    So if all lenders have essentially the same costs to obtain, process, and close your mortgage loan, how can one lender do it cheaper then the next? The answer is they can't. Remember that nothing is ever free. Lenders simply use "reverse points" whenever they claim to offer any sort of no origination, no closing costs, or lower closing cost mortgage.

    Best Mortgage Company in Minnesota Wisconsin South Dakota

    Simply put, the lowest rate & the lowest fees do not go hand-in-hand. NO LENDER can offer both together. I can give you the lowest interest rates, but it will cost you in higher closing costs. I can give you the lower closing costs, but lenders make it up by charging a higher interest rate. Most lenders quote their best rate in combination with covering all third party fees (appraisal, credit report, title company, state taxes, county recording fees, etc) with 1% origination ("standard" in the example below).

    Interest Rate versus Closing Cost Comparison

    Here is an example of Rate vs. Costs on a $200,000 - 30 year fixed loan
    (Note: Not actual rates)

      Lower Rate Standard Quote

    Low Cost

    Total NO Cost






    Origination Fee





    Discount Points





    Closing Costs $7167 $5042 $3042  $0.00

    Monthly P & I Payment





    10 Years of Interest





    20 Years of Interest





    30 Years of Interest





    good faith estimate in MN, SD, or WI


    Interest Rate and Closing Costs Education







    Different Interest Rate Quote Techniques













    Another good tool is to ask based on a hard closing costs number. Ask everyone for a quote based on closing costs being $7,000 for example. Then the only difference is interest rate.

    More information on How to Shop Interest Rates







    Low interest rate vs low closing costs. What is best?





    Lowest interest Rate mortgage application

    I can offer you all four options on all most of our mortgage loan programs.

    The combination of rate & fees can be very confusing. One lender is screaming "No closing costs." A second lender may quote you 5.25% with $2246 in fees, while another lender is offering 5.00% with $4130 in fees. So are closing costs and fees bad? Well if you ask everyone's brother who has a real estate license and knows everything about mortgages, then the answer you will most likely hear is yes.  I am here to tell you everyone's brother is probably wrong.

    Good enough answer?  I don't think so...

    Begin by asking yourself "How long am I going to be in this loan or property?" This is the single most important question to determine most of your rate versus cost choices.  Review the chart above again, It becomes very obvious based on how loan you are going to be in the home if the Best Interest Rate or the Lowest Closing Cost makes the most sense for you and your family.

    Congratulations, you are now smarter that everyone's brother, mother, father, sister, friend, or co-worker with a Real Estate License.