Mortgages come in many shapes and sizes. The rate on a 15-year mortgage, for example, is usually less than the rate on a 30-year. The rate a lender offers one customer might be significantly higher than the rate offered to a customer with better credit. Whether you are in the market for your first home loan or are looking to refinance your current loan to take advantage of the still low interest rates, learning how to negotiate your mortgage rate can mean more money in your pocket.
The first rule to follow when learning to negotiate your mortgage rate is to shop around. If you only talk to one lender, you have no way of knowing what’s out there and have no way to know if that lender is giving you a good rate on your loan. The rate you are offered and the types of fees you might need to pay will vary based on whether you work directly with a lender or go through a broker. The Federal Trade Commission has prepared a mortgage shopping worksheet that can help you see the differences in the offers you receive at a glance.
Go in prepared
The better your credit, the better the position you’ll be in when it comes to negotiating your mortgage rate. If possible, wait until your credit has improved before applying for a new loan or trying to refinance your current one. Your credit history is just one part of the equation when it comes to working with a lender to get the best rate. Your income and assets also pay a part, as you can use them as leverage and proof that you’re more likely to repay the loan.
If you don’t have a great credit score or a lot of assets, one way to go into a negotiation prepared is to get a number of offers from different lenders. Instead of using your own history and assets as leverage, you’ll be using one lender’s offer to try to get a better deal from another.
When in doubt, ask
Getting a mortgage often involves a number of fees. It’s in your best interest to find out what each fee is and why it’s there. Feel free to ask the lender to break down the various fees for you, so that you have more leverage. In some cases, a lender might bump up a fee so that he or she gets a higher commission. If that’s the case, you most likely have room to negotiate with the lender to get him or her to reduce the cost of the loan.
When applying for a mortgage, the ball is in your court in terms of making sure you get the best rate possible. Don’t be afraid to work with a lender or to ask any questions about fees or rates you’re unsure about. Taking the time to shop around and negotiate can mean significant savings in the long run.
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