Making Sure You Get the Best Mortgage Interest Rate
When you are looking to buy a home, your first priority is finding a lender who will give you the amount you need for the home you want. Naturally, you want the best mortgage rate, but as the borrower, you may not feel that you have much leverage to negotiate.
However, even half a percentage point in the interest rate you’re tied to can save you thousands of dollars over the course of your loan, so it is in your best interest to try to use whatever negotiating power you may have at your disposal. If it’s possible to negotiate a better mortgage rate, then you always should; here are some strategies to get you started on the process.
Get Multiple Quotes
As with anything else, when you compare options, you benefit. Comparing rates from multiple lenders helps you learn how much room there is to negotiate a rate offer, and it also gives you the leverage of being able to go to a different lender if you don’t like the terms one lender is giving you.
In the Internet age, it’s incredibly easy to compare lenders online and get multiple quotes, so there’s no reason not to take this step.
Get a Float-Down on Your Rate Lock
An important part of the mortgage process is locking in your mortgage rate. This is where you and the lender agree on a mortgage rate around the time that you agree to the loan. At this stage, the lender promises to lock in that rate for a certain amount of time – ideally, for enough time to carry you through until closing.
This prevents you from having to worry about a sudden rate hike derailing the process. However, it also means you cannot take advantage of a rate drop, so be sure to ask your lender for a “float down,” which is a one-time option to grab a lower rate if one becomes available before closing.
Improve Your Credit Score
The number one way to improve your mortgage rate is to improve your credit score. This is the number that companies look at to assess your level of risk and to set your mortgage rate.
If you are not happy with the rate that lenders are offering you and they will not budge, do not be afraid to walk away, take a few months, and get that credit score back into shape. It’s not hard to do.
Use the money you would have been using for your down payment or closing costs or to pay your mortgage, and instead, pay down your credit card bills. A few months with on-time payments and a low debt-to-income ratio with a high amount of available credit can do wonders for your credit rating.
Don’t Be Too Eager to Land That Mortgage
Of course, you are eager to get your mortgage and to start living in your new home, but wise homebuyers will take advantage of long-term thinking. You could be trading those few months for dramatically lower monthly payments, after all, and savings of thousands of dollars over the life of the loan.
There may not be a lot of room to negotiate when it comes to mortgage rates, but don’t forget that every little bit counts. When pursuing a mortgage loan, don’t be discouraged, stand firm, and take the time to employ the strategies above to give yourself the best chance of getting the best possible rate for your home mortgage.
