Not getting the lowest mortgage rate? 4 reasons why

We've all heard advertising about "historically low mortgage rates not seen in years." A few years ago, securing a 5.85% mortgage was considered fantastic. Buyers were able to buy more house even with rising mortgage rates, and life was never sweeter…until the bubble burst and prices started falling.

Well, that also meant mortgage rates would drop to encourage weary buyers to get back into the market. Today we have rates stabilizing around 3.5%. Still, if you're reading this article, maybe you're wondering, "If rates are so low, why can't I get the lowest mortgage rate?" I'll tell you why:

1. Bait and switch

This is typically the domain of lenders who use somewhat questionable tactics to get customers on the phone. They figure once they have you, and you are giving them your basic information (income, credit score, intended purchase, area, etc.), they can reel you right in. The problem is that you may not fit their ideal credit profile. When they find out, they will often throw you into a rate that is vastly different than the terms advertised.

2. Credit score

The rates you see advertised are always for those with the highest tier credit. Think 700+ with the cream of the crop starting at 750. Therefore, if your scores hover around, for example, 650 or just under 700, then you can expect the rate to be higher depending on where you fall on the credit score spectrum.

3. Owner-occupied vs. investment property

If you plan to live in the property, you can typically qualify for a lower interest rate than if you plan to secure the property as an investment or vacation home. Lenders believe that you will have a vested interest in maintaining an owner-occupied home vs. one that you simply rent out or avoid when times get rough.

4. Type of property

Is your purchase a condo? Townhome? Single-family? Lenders generally like to see single-family purchases; anything else can signal a higher rate for your purchase.

Of course, if your credit profile is clean and above 700 with a significant downpayment, this may change the numbers a bit. It is best to talk with each lender to discuss their preferred criteria.