Tips to Help You Negotiate the Best Mortgage Offer
While not every lender will be willing to negotiate, it’s important to stay flexible and do everything possible to get the best mortgage rate possible on your new home. Even just a few tenths of a percent off your mortgage rate could be enough to save you tens of thousands of dollars in interest during the course of your mortgage contract. It’s vital for anyone buying a home to know how to negotiate mortgage rates. The following tips can help you negotiate a better mortgage offer.
Increase Your Credit Score
Before you even begin the process of finding a lender, try to improve your credit score as much as possible. Only some lenders will be willing to negotiate, but whether they agree to your negotiated terms typically comes down to your creditworthiness as a borrower. Submit requests for your credit report from the three major credit reporting companies and take an honest look at your current credit score and debt.
Try to pay outstanding debts down as much as possible before you start looking for a mortgage lender. Not only will eliminating some of your outstanding debt improve your credit score and strengthen your bargaining position when it comes to negotiating mortgage rates, but it will also make you more financially flexible to handle the fiscal responsibilities of buying and owning a home.
Don’t Be Afraid to Shop Around
Take your time when looking for a lender. See if you can find mortgage rates from a few different lenders online before you take the time to meet with any of them in person. Also, check online reviews for other borrowers’ recommendations and warnings when it comes to certain lenders. These reviews can help you identify the lenders who will be most willing to negotiate with you and the ones who keep their financing terms set in stone.
Once you have a few potential lenders in mind, make time to meet with their representatives to talk about your mortgage needs and expectations. Well-qualified borrowers have much more bargaining power. If you have a solid credit score, make enough money to afford your mortgage comfortably, and offer as much documentation as possible to a lender, you’re more likely to receive offers for more attractive mortgage rates.
Read Your Loan Estimate Forms Carefully and Use Them Wisely
When you approach a lender about a mortgage, the lender will run a credit check and assess your risk level as a borrower before providing you with a loan estimate. This document outlines very important information about the proposed mortgage, including projected closing costs, interest rate, and additional fees. Some lenders may also offer lock-in options that allow you to effectively reserve the current offered interest rate for a certain amount of time. If market rates increase, the locked-in rate will remain the same. It’s also possible to extend or re-lock through some lenders.
Once you have a loan estimate, you can essentially take it to another lender to ask if they can do better. Shopping your offer helps you keep your options open while you find the right lender who will offer you the best mortgage rates.
Consider Making a Larger Down Payment
The more money you put down toward a home in a down payment, the less you will need to pay over the course of the mortgage contract term. This may sound straightforward enough, but there is a hidden benefit to paying a larger down payment: you might qualify for discount points. In most cases, a borrower can secure a discount point for every additional 1% of the total cost of the home the borrower pays, and each discount point will take about .25% off the interest rate for the mortgage.
When you consider the average cost of buying a home and the length of the average mortgage contract, that discount could equate to tens of thousands of dollars. For example, paying 12% on your down payment instead of 10% could mean .5% less interest for the entire course of the mortgage contract.
Buying a home in Washington, Oregon, Colorado, or Idaho is a difficult process for many people, and securing an acceptable mortgage rate is often the most difficult part. Keep these tips in mind as you begin your home buying journey and you could save yourself an incredible amount of money over the course of your mortgage contract.