How to negotiate the best mortgage for you with a lender

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Taking out a mortgage to finance a home purchase is an important step, and it’s a critical time to use your consumer savvy to find the best deal possible. This is especially true in today’s market. Since interest rates are rising rapidly and you’ll likely be paying your lender for the next 30 years, you’ll want to ensure an affordable monthly payment.

So how exactly do you do that?

The key, experts say, is to shop around. Just as you’ll tour many homes before deciding between that cute colonial or a modern modular, you’ll want to check out various mortgage lenders to find the right one for you.

After all, different loan providers offer different interest rates, loan types, and fees. Exploring what several have to offer will help you land the best deal.

“Just like you can shop around for the lowest price on a car, you can shop around for mortgage lenders to find the best prices and options available,” says Lauren Bringle, a licensed financial advisor at Self Financial, a fintech company. “At a minimum, it’s good to get three quotes from three different lenders. You can then compare the options.

Plus, once you’ve compared what a few lenders are offering, you can play them against each other to get an even price. better OK. Things like closing costs, loan origination fees, underwriting fees, and interest rates can all be negotiable, and it really pays to haggle.

“It’s not about playing games to negotiate,” says Bringle. “It’s just a simple question: ‘Is this a good deal compared to the other options available to me?’ Yes or no. Then you can sign or walk accordingly. The informed homebuyer who has shopped around is usually able to negotiate better than a homebuyer who hasn’t done their research.

Don’t know how to negotiate? These tips below will show you the ropes of negotiating a great mortgage, with low interest, affordable closing costs, and more.

Know where you stand financially

Are you afraid to check your credit rating? It’s time to overcome this.

Lenders look at a variety of factors when approving someone for a home loan and determine the specific interest rates and terms offered.

“In general, a relatively high credit score and good debt-to-income and loan-to-value ratios will help borrowers get the best terms,” says Kevin ParkerVice President of Field Mortgage Originations at Navy Federal Credit Union.

Allow us to translate: the debt-to-income ratio refers to the amount of your monthly income that is used to pay off debt. The loan-to-value ratio compares the amount of the mortgage to the appraised value of the home, i.e. whether you expect to finance, say, 50% or 80% of the purchase price. A higher loan to value ratio is a riskier proposition for a lender.

Knowing your credit score, income, and total monthly bills puts you in a better position to find the best lender. Homebuyers with excellent credit scores and a healthy savings account are sometimes in the best position to negotiate. But just knowing your numbers is a step in the right direction.

Reasons to get pre-approved for a home loan

In a hot seller’s market like the one we find ourselves in, you need to be able to jump when you see a home you love. Mortgage pre-approval will help you do just that. It also helps you get the best deal before you start bidding. When you get pre-approved for a mortgage, you complete a mortgage application. The lender will perform a credit check. Then you will receive an offer outlining the interest rate, closing costs and terms of the loan. Ta-da, you’re pre-approved!

The pre-approval process also lets you know what you will be entitled to based on your finances. You will also see the down payment required in black on white. With this paperwork in hand, you can negotiate with other banks. It’s a good idea to get pre-approved from more than one lender so you know up front where the best deal is.

“Depending on the property you’re buying and your financial profile, the loan programs you qualify for with different lenders can vary significantly,” says robert heck, Vice President of Mortgages at Morty, an online mortgage broker. “It is very important to evaluate this and to go around the different lenders. The goal is to feel confident signing on the dotted line at the close.

Ask lenders to bid for your business

Once you know what interest rate a lender is offering, see how it compares to others. If you have a preferred lender but the rate offered is higher than that of another bank, ask if your lender can match the rate. Share that another bank has already offered you a lower rate.

Lenders might be willing to lower the rate to get your business. Or you can negotiate a slightly higher down payment for a lower rate.

For example, Parker says, Navy Federal Credit Union will match a better rate than a customer finds at another bank. He just needs a loan estimate from the other financial institution. If it cannot match the competitor’s rate, there are often other incentives. For example, he will deposit $1,000 into the client’s account after the mortgage closes.

“Consumers can go back and forth from lender A to lender B. They have these conversations and see if they can get better rates based on what others are offering,” Heck says.

Review your statement of closing costs

Closing costs are what you pay the lender to process the transaction. They include loan origination fees, appraisal fees, title insurance, taxes and other costs. The total can be high, usually around 3-4% of the total loan amount. Sometimes, however, you can negotiate them.

Parker suggests asking your lender for an estimate of closing costs first. Since they vary from bank to bank, “be sure to itemize these fees so you know exactly what costs to expect at closing,” he says.

Before you even apply for a loan, ask for a quote. This will give you a general idea of ​​what the lender might charge.

“When shopping with multiple lenders, ask for details regarding interest rates and closing costs,” says Parker. “Having all the detailed rates and fees will strengthen your position in the home buying process.”

Find a better deal on closing costs elsewhere? Just ask your loan officer to reduce or waive some of these charges. Loan origination or application fees and title insurance are most likely negotiable. Others, like property taxes and credit check fees, are less likely to change, according to Rocket Mortgage.

When negotiating, don’t be afraid to be direct.

“A consumer shouldn’t be afraid to hurt someone’s feelings,” Heck says. “It’s a huge financial transaction. Ask the questions you need: “Is this my best option? ‘Do you have any other programs or offers that you think could be better?’

Being proactive in this way will ensure you get the best possible deal on your mortgage.

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