Remember the first time you bought a used car? You were probably young and bargained a lot to get the price down to where you thought it was a good deal. You may have gotten older over the years, but now that you're trying to buy a home with a big mortgage, you should brush up on your negotiating skills so you can save thousands of dollars on your mortgage.
First, let's talk about fees, which include all of the processes and paperwork that mortgage lenders charge you for. Fees for putting together documents and for doing research are examples of fees fee. Every single one of these fees can be changed. Even if they aren't using a scribe to write out your mortgage papers, $300 is a lot to pay for a standard mortgage contract to be made. Ask about every fee and try to talk it down. Let the lender know you have other options, and make them work for your business. Even if you only save $100 by negotiating, that's $100 more in your pocket for just a few minutes of work. But keep in mind that you should spend most of your time talking about the big fees, not the small ones. Start with the biggest fee on the list, which is usually the lender or broker fee for points, and go down the list.
Now, let's talk about the interest rate you pay on your mortgage. Most of the time, you won't be able to change your rate by a full percentage point or more, but even a small change of a quarter of a percentage point can make a big difference in how much you pay over the life of your loan. The best way to negotiate with mortgage lenders about rates is to shop around and let each one know you are doing so. Always talk to at least three mortgage lenders and check out the ones who have set up shop online. The best rate deal may not even be with a lender in your hometown.
You should also know what points are when you are negotiating your mortgage. Your lender won't give you points for free, since they are the costs you pay up front that lower your rate. Points are also known as pre-paid interest. The best thing you can do is make sure you know that points are only worth anything if you plan to stay in your home for a long time and don't plan to refinance in the next few years. Still, if you decide to buy points, don't be afraid to negotiate. You could save a lot of money by asking your lender to work with you on the points.
In the end, lenders know how much money they want to make from a mortgage loan. They also know that they aren't the only lender in town, so they will usually work with you to set up your mortgage in a way that benefits both you and them. The most powerful tool you as a buyer have in a negotiation is cash (and a good credit score). The more money you can put down on your home as a down payment, the better you will be able to negotiate with the lender.
When you're getting ready to get your next mortgage, don't be afraid to spend some of your time trying to get the best deal possible. Don't expect to win every battle, but if you're willing to negotiate with your lender, you should be able to get some of the costs down. Just remember that negotiating means meeting the lender in the middle. You can't get everything.
