Why do Lender Rates Vary So Much in Pricing?

By Ken DeLeon

Home buyers generally care more about the amount of their monthly mortgage payment than they do about the exact price of their home. The reality is, how much house you can afford is directly related to your monthly mortgage payment. While home prices generally fluctuate merely by a few percentages between a good deal and overpaying, there can be a much greater variance in mortgage rates. 

This is because bank guidelines can greatly vary, and while one bank may be the perfect fit for one type of borrower, this same bank may be a poor choice for another borrower. At DeLeon Realty, we direct our clients to the right lenders by knowing all about the unique attributes of each lender and what bank is the best referral for our clients’ individual circumstances. 

For example, the rates on a purchase of your primary home from the right Wells Fargo (“Wells”) representative can be ½ to a full point lower than another bank. While Wells always has competitive rates, these amazing rates  are available because Wells considers your down payment to be part of their relationship pricing. 


Many other banks also have relationship pricing, where in exchange for forming a relationship by giving the bank money or stocks to manage, the borrower will get a lower mortgage rate. Wells is unique in that they consider your down payment as part of that relationship and you do not need to keep any funds in the bank after closing. For example, if you buy a $4M home and put down the requisite 25%, or $1M, so long as this down payment is in your account sometime during escrow before it gets wired to the title company, you get a relationship discount of ½ point lower. On a $3M mortgage, that savings is $15,000 per year. Additionally, the lender I work with at Wells gives my clients a lower rate than others, as he makes it up in volume since I am one of his main referral sources. While the market rate for a 30-year mortgage at other banks is hovering around 3.5%, my clients are getting a 2.75% 30-year rate by putting in a million for their down payment to get a ½  point off and get another ¼ point off from my Wells representative to achieve such an amazingly low mortgage rate. 

While Wells is presently my preferred bank for purchasing your primary residence, they are less advantages for an investment property. This is because they both lose their relationship pricing on investment properties and surcharge a much higher rate on investments, so you can pay up to 4.5% on a 30-year at Wells, nearly double the rate for primary homes. For investment properties, I often direct clients to my representative at Bank of America (“BoFA”). While BoFA is often not competitive for purchasing a primary home, they do not increase their rates for investment property like most banks do, so they are by far the best choice for investors. 

For entrepreneurs who have variable incomes, First Republic and Silicon Valley Bank are well suited banks to understand an entrepreneur’s volatile income and unique circumstances. These banks will lend to those who have great futures, but are “out of the box” loan applicants. 

Other real estate brokerages also offer advice on mortgages; however, the fundamental distinction is that for many other brokers it is a profit center, where clients get funneled to very few choices with high mortgage rates to provide additional income to the brokerage via referral fees. Conversely, at DeLeon Realty we employ a specialist who previously worked in both private banking and a large bank and who can
expertly and unbiasedly advise clients. This is complimentary benefit to our clients, along with a myriad of other free services we provide. 

Given that all buyers’ agents are compensated at the same rate by the seller and free to the buyer, shouldn’t you work with America’s top real estate team that provides expertise and insight on every facet of your purchase including which lender will provide you with the best rate given your individual circumstances? Contact me at
Ken@DeLeonRealty.com if you would like to hear about how we help our clients select the best loan for them.