It can be difficult to determine what kind of interest rate you can expect if you rely on advertisements. Rates change everyday, sometimes more than once. Rate advertisements or surveys could be days old. And just when you think that you have a handle on it and your research has indicated that 30 year fixed rates, for example, are averaging 6.00%, you see a television commercial touting a rate of 5.50%. Is this possible?

The answer is that anything is possible, but in the case of mortgage rates, this is beyond unlikely. The real answer is in the details, usually the small print. Simply put, all lenders are dealing with essentially the same rates. For example, a typical lender's offerings for a 30 year fixed rate might look like the following:

*Rates	*Points
5.500%	1.50
5.625%	1.25
5.750%	.875
5.875%	.50
6.000%	0.00
6.125%	(.50)
6.250%	(1.00)
6.375%	(1.25)
*These figures are for illustration purposes only and do not necessarily reflect real market values.

As a borrower, it is best to think of Discount Points (each point equals 1% of the amount borrowed) as a part of the "price" of your interest rate, which is the "product". Negative "prices" are paid to borrowers as a rebate, or "interest rate credit". Using the above table as an example of one hypothetical lender's offerings, in your shopping you might find very slight variations in the points (price) offered for a particular rate (product) by other lenders. So it is possible in this example that you might be able to obtain 5.875% for zero points from another lender. But you will never see so much difference that one can offer 5.50% at zero points - unless of course they are in business to lose a great deal of money. And it is a pretty safe bet that you would not believe anyone is in business to provide you products and services and lose money doing it. So there is no reason to believe that any lending source can give you an interest rate significantly lower than that of anyone else.

In effect, all lenders pay the same price for their product (rates). So expecting to obtain a 5.50% interest rate for the same price as a 6.00% rate is like expecting to buy a Rolls Royce for the price of the average sedan.

Sure you can get the 5.50% rate, but the price (points and/or fees) will be higher. In the rate examples above, the 5.50% rate would cost you an upfront payment of 1.50 points (1.5% of the loan amount) as opposed to 0 points for 6.00%. In some cases, it is not points, but additinal fees of varying names that can result in a lower rate and provide the necessary profit to the provider. This is how a lender can advertise a rate that looks lower than everybody else. The part about the cost of this rate (the points/fees), appears in the small print and/or in the details. The low rate appears not because you can actually get a better deal from that particular lender, but to get your attention and entice you to call them.

Paying points is not necessarily a bad thing. Many borrowers choose to pay points in order to lower their interest rate and therefore their monthly payment - and the points can be tax deductible. That is a personal choice. But if you want to pay additional points to lower your interest rate, you can do that with just about anyone who will provide you with a loan. You do not have to be fooled by the low rate hooks in advertisements.