The interest rate on your mortgage will affect your monthly payments, as well as the total cost of buying a house. You’ll also have to pay closing costs, which generally add up to several thousand dollars. It’s in your best interest to shop around and get the best terms possible before you move forward with a home purchase.
When you get preapproved for a mortgage, you might be disappointed with the terms that you’re offered. If so, you might be able to negotiate terms that are more to your liking.
Compare Offers From Multiple Lenders
To get a good deal, you should request preapproval from at least three mortgage lenders. Carefully go over each offer and compare the terms. Those offers aren’t set in stone. Mortgage lenders compete to earn business. If you want to negotiate a better deal, offers from competing lenders can give you leverage.
Ask a Lender to Improve Its Offer
A representative might be able to reduce your interest rate and/or closing costs if you contact the lender and ask. Stating that another company offered you better terms and providing a copy of the other lender’s offer can put you in a strong bargaining position.
Use a Pre-Existing Relationship to Your Advantage
If you got preapproved for a mortgage and you already have a checking or savings account, credit card or auto or personal loan through the same company, that might help you negotiate better mortgage terms. Financial institutions value loyal customers. A lender might be willing to improve on its initial offer if you’ve been a customer in good standing for several years.
Get the Details in Writing
When you contact a lender to negotiate your mortgage, a representative might verbally offer to modify some of the terms. Ask for everything in writing so you can review the new terms and make sure that you understand them. Having proof of the new offer can help you avoid a problem when it’s time to move forward with a purchase.
Check Your Credit
You should have checked your credit reports before you applied for mortgage preapproval, but perhaps you didn’t. If the interest rates that you were quoted were higher than you expected, it might be because of the information that lenders were working with.
Errors in credit reports are common, and they can cause consumers to get charged higher interest rates than they should. Request copies of your credit reports and look for errors. If you find anything that doesn’t seem right, have it corrected.
