Several factors need to be considered while choosing a mortgage. The mortgage terms and conditions should match your requirement; the interest rates, fees and closing costs charged should be reasonable depending on your credit score; and the lender should be reliable and provide you good service. Even after all these factors have been taken care of, there is still a margin for negotiating with your lender for better terms, lower costs and sometimes even lower rates. Here are a few suggestions on how to negotiate a mortgage with a lender.
Once you get the Good Faith Estimate from the lender, go through it carefully and get all the fees on the list clarified by the loan officer. The GFE will list out all the charges that will be incurred by you in the mortgage deal. This includes any third part fee that you may have to pay. Don’t hesitate to ask about the reasons for charging any particular fee mentioned on the itemized list. Fees charged by a lender or a broker are usually calculated in terms of points. For instance, 2 points charged by the broker on a $600,000 loan indicates that the broker fee is $12,000.
While negotiating fees, you should make it clear that you are considering other lenders as well. If you have a good credit history, you will have more leverage and you can be firm about demanding for a lower charge.
Remember that most fees are negotiable. Lenders are as keen to close the deal as you are, and they may consider lowering some charges if that’s what it will take to move the deal forward. There are some charges that are more flexible, such as a second mortgage processing fee, which can be classified into fixed and variable fees. Fixed fee remain the same regardless of the size of the loan, while variable fee depends on the loan size. Both of these are negotiable.
Third party fees are usually non-negotiable. These are costs incurred towards inspections, credit reports, appraisal and other services that the lender has to use to process your loan application. These will be passed on to you by the lender, who also doesn’t have any control over them.
Though interest rates are difficult to negotiate, there are some ways in which you can have them lowered. You can pay a larger amount up-front to seek a reduction in interest rate. Another way of bringing down the rate quoted by your lender is to ask them if they can offer you a new lower rate if you improve your credit score before closing the deal.
An experienced mortgage broker can be extremely useful, as he will know exactly how to negotiate a mortgage. He will be aware of all the charges and will know where there is a possibility of a reduction. With a mortgage broker by your side, the lender will know that he cannot include any unreasonable charges in the deal.