Shopping for a mortgage is not for the faint of heart. The process and its resulting financial obligation proves intimidating for many, particularly those shopping for their first mortgages. When obtaining your mortgage, don't allow the high-stress nature of taking out a loan of this type stop you from negotiating. While your negotiations may not work wonders on your resulting mortgage rates, you can negotiate your rate and save yourself quite a bit of cash throughout the life of your mortgage.
Research the Market
Your attempt to negotiate a mortgage rate will likely prove ineffective if you enter the negotiations ill informed. Before you put on your bargaining hat, explore the market and gather rates from several lenders. Use this information to decide what you should ask for. Making your request reasonable will likely increase your chances of success. For example, if the lowest rate currently on the market is 7.1 percent, and you go in asking for a 4 percent interest rate, you will likely not get the positive response for which you had hoped.
Play Lenders Against Each Other
Once you are armed with credit knowledge, use this knowledge to put lenders into competition. If, for example, you find one loan that has lower up front costs but a higher interest rate, show this lender a similar offer you have received with the more favorable rate. Depending upon the market and the flexibility of the offer, the lender may be willing to drop his rates a few points to keep you on the hook as a potential mortgage customer.
Point out your Creditworthiness
If you have spent your early adult years building the perfect credit record, now is the time to make it work for you. Don't be shy about the quality of the credit report you have crafted through your careful spending and bill payment. Mention to your lender that your credit score is high, or your record excellent. While the lender likely already knows this, mentioning it makes it clear that you also know that you are supremely credit worthy and deserve the best rate they have to offer.
Explain your Credit Issues
Even if your credit report leaves a bit to be desired, you can still negotiate. As the Federal Reserve Board reminds, there is always room to negotiate, regardless of your creditworthiness. If your record reflects some irresponsible credit usage, explain the reason for these derogatory reports to your lender. If, for example, you experienced financial problems during school or you allowed another individual's money misuse to hurt your credit, explain the particulars of the situation to the lender when requesting a term negotiation. If your reasons are sound enough, you may sway the lender's inclination to negotiate with you.
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