Here are some top tips for negotiating mortgage loans that will benefit you as you begin searching for your new home.
Shop Around First
There are many mortgage lenders out there, and they’re all competing against each other for your business, so it makes sense to shop around a bit before selecting a loan offer. You can quickly check lenders’ websites for their mortgage loan products, and you may be able to obtain an online quote while you’re at it.
Use Lender Quotes
Try to obtain at least a few mortgage loan quotes beforehand before you begin negotiating your hoped-for loan. Also, don’t be afraid to ask your preferred mortgage lender for a better deal or to at least match an offer from another lender.
Lenders can often reduce their loans’ interest rates, for example, to earn your business.
When doing this, make sure to keep in mind the differences in interest rates and monthly payments.
While changing one factor may save you money on your monthly payment, it may involve a larger interest rate that will cost more in the long run. In these situations, make sure you know which is most important to your finances right now.
Also, remember that loans can be renegotiated down the road if your financial situation changes.
Discount Points
In mortgage lending, a “discount point” allows you to add money to your closing costs to obtain a lower mortgage interest rate. One discount point typically equals 1% of the mortgage loan amount, with each point lowering the loan’s interest rate by about 0.25%.
Up to a limit, mortgage lenders will often negotiate discount points to give borrowers a lower interest rate.
Loan Structuring
Though mortgage loans are highly regulated, lenders have some flexibility to structure them to their borrowers’ best advantage. Look at your hoped-for mortgage loan’s interest rate and loan term (called “rate & term”) to start, and also ask the lender about any adjustable-rate mortgages (ARMs) and other loan products they offer.
Have a Strong Application
To get the best mortgage loan, make sure your mortgage application is as strong as possible.
other related articles of interest:
5 Questions You Should Ask Your Mortgage Lender Before Signing
Before you apply for a mortgage, work to obtain a good credit score, pay off some of your bills to lower your debt-to-income (DTI) ratio, and try to provide a decent down payment. The bigger your down payment, the greater your chances of negotiating a lower interest rate.
With just a little planning and preparation, and a willingness to negotiate with your lender, you can often obtain a better deal on a mortgage loan than you thought possible.
If you can take some time to come up with a negotiating plan for your mortgage loan, you’re also likely to end up having an enjoyable experience as you take the keys to your new home.
Image Credit: mortgage loans by envato.com
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