How to Negotiate Your Mortgage Rate Getting a great mortgage rate, especially when it comes to constructing your own house, can take some investment and time. Not only do you have to invest time but you need to understand what you are doing. 1. Before You Need It The best time to start preparing for a great mortgage is before you need it. There is a very good change that you will not rent your whole life and a pretty good chance you will not pay $400,000 cash. With the knowledge that you will eventually need it there are a number of steps that you need to take. The first step is your credit score and your collateral. Not much really you can do about collateral unless you really feel that you need to burn money. However, make sure to get your score up. Have a few credit cards, actively use them, pay off all your balances on time. Take out small loans for larger purchases and pay them off. The longer you have good credit history the better your credit score will be. 2. Just Before Your Search Spend a few hours and research mortgage jargon. This will make you more knowledgeable and help you understand exactly what you are purchasing. It will also catch lenders off guard and dissuade them from trying to tack on extra expenses. Determine your budget and stick to it. This is a big decision and needs to be made before you speak with lenders. If you go with no budget you may end up taking a loan much too large for you needs. 3. Call Around You should be calling around and finding your loan before you have begun looking at houses. This gives you more time to negotiate with banks and reduce the pressure you may feel. Now that you are actively seeking a deal you need to 4-5 different lenders. Call these different lenders and act for different quotes. In order to get the most accurate quotes from lenders you need to give them the most accurate information. Go online first and find your credit score. Many companies can give you a general feel for your score, but you
need to know what it is exactly. Visit myfico.com. For around fifty dollars you can get your score from the three bureaus as well as your credit history. Donâ€™t worry, this is a soft pull and will not negatively affect your score. On that same note, do not let lenders pull your credit score till you have chosen one. This hard pull will affect your score. Check with local banks and credit unions apart from your own bank. Also throw in a mortgage broker or two. Collect information from these different banks. Gather up the rates the offer along with closing costs and other associated terms. The more detail you collect the more bargaining power you have against the different lenders. 4. Compare Quotes Take all of the information that you have collected from the lenders and set them next to each other. The lenders should also have sent you a GFE (GoodFaith-Estimate) and a TIL (Truth in Lending). The TIL amortizes the costs of the loan over the life of the mortgage rate. It takes theses costs and adds them to the interest rates giving you your APR (Annual Percentage Rate). On the third page of the GFE document there is space for you to compare your different loans and see what your different options include. Again you want to compare accurate information not commercials. Mortgage rates in commercials are showing rates that will only be offered by the ideal borrower. 5. Call again and Negotiate Now that you understand what your options are. Go to your top three lenders and call them. Explain what your needs are and what better deals you have been given. Give them reason to bid against each other. The better your credit score and history the more bargaining power you have. Call them until you receive the deal that you are looking for. You will probably feel like a jerk when negotiating. It will seem that you are the only one who is bothering them this much looking for a better rate. Do not budge! This is a business arrangement and not a friendly conversation. Negotiate for the price you want. Make sure the price is within your budget. If you were thinking of building a new house talk to a few general contractors to get a feel for what you want and can afford.
6. Authorize and Sign After having looked at all of the details you are ready to make your decision. If the details have changed be ready to walk away unless they give you what you agreed upon. Authorize the pull on your credit. Let the bank write up the agreement and make sure to read it in depth. Check that what you discussed and agreed to is inside the agreement. Once you are sure, sign the agreement and begin looking for houses in your budget, best of luck! Photo Pin: Grant Hutchinson, Alan Light, TheBusyBrain,
Published on Sep 23, 2013
Getting a great mortgage rate, especially when it comes to constructing your own house, can take some investment and time. Not only do you...