5 Ways to Negotiate for the Lowest Mortgage Rate

When you are applying for a mortgage, securing the lowest available interest rate is one of the most important things that you can do to make your loan payments more affordable. Unfortunately, many home buyers don’t realize that they can/should negotiate with lenders for better loan rates. Here are some tips that can help savvy home buyers negotiate a better mortgage rate.

Shop Around to Find Lenders with the Lowest Rates
You should never assume that all lenders are the same, nor that they all offer the same mortgage rates. Definitely don’t assume that your local bank or credit union can offer you the lowest rates. Instead, you need to shop around and research multiple lenders, as well as their respective interest rates on home loans. You can do a lot of your own research online. However, you could also try visiting with a mortgage broker to see if they can help you find a low interest rate on a home loan.

Ask Your Lender to Match Another Lender’s Lower Rates
If you have already been pre-approved for a mortgage by a bank or lender, but you have found someone else with a lower interest rate, ask your lender if they can match that offer. You have absolutely nothing to lose by asking. Furthermore, your lender might feel incentivized to match that offer to keep your business.

Consider Purchasing Discount Points
Discount points – also known as mortgage points – are fees that you can pay a lender in exchange for a lower mortgage rate. One discount point will typically cost you the equivalent of one percent of the value of your home loan. For example, if you plan to borrow $200,000, then one mortgage point would cost you $2,000. Each discount point that you purchase will reduce your interest rate by 0.25 percent. Therefore, it can be a good way to secure a better mortgage rate. However, you will need to determine whether the upfront cost of purchasing discount points will save you money over the life of your loan.

Improve Your Credit Score Before Applying for a Mortgage
Another thing you can do to negotiate a better mortgage rate is to improve your credit score before you apply or get pre-approved for a loan. That’s because no matter how competitive interest rates are, borrowers with the best credit scores will always qualify for the lowest rates. You are entitled to one free credit report each year. Therefore, you should review your credit report for any possible mistakes that could be hurting your score. Furthermore, you can likely find ways to boost your credit score. For example, if you owe a lot of credit card debt, paying it off can improve your credit rating. Avoid making costly credit mistakes like missing payments.

Put Up a Larger Down Payment
Finaly, in the old days of home buying, it was common practice for lenders to require borrowers to make a 20 percent down payment on a home. In recent years, it has become very common for lenders to require little-to-no down payment for mortgages. However, if you can afford a larger down payment, you can likely secure a lower interest rate on a home loan.

In short, if you are planning to take out a mortgage, don’t settle for the first quote you get from a lender. Instead, you should talk to multiple lenders to find the lowest interest rate on home loans. If you find another lender that offers a better rate, see if your lender can match it. You can also reduce your mortgage rate by purchasing discount points. Make sure that you are doing everything you can to boost your credit score before you apply for a mortgage. Oftentimes, making a larger down payment will get you access to the best loan rates.