Yes, You Can Negotiate Your Mortgage Rate: 8 Things To Keep In Mind

Are you looking for a new mortgage? Making some smart money moves for homeowners — such as negotiating your mortgage rate — can help you lower costs.

Not everyone realizes that you can negotiate your mortgage rate, but it is possible. Keep these things in mind when trying to negotiate your mortgage interest rate.

1. Know the mortgage terms you need

Before negotiating loan terms, it’s best to know what exactly you're looking for. Both first-time buyers and seasoned homeowners can benefit from doing research about which loan type best fits their needs.

Higher down payment amounts and shorter loan terms can often help reduce your mortgage rate.

2. Understand that posted interest rates are negotiable

Published mortgage rates are not always the rate that you actually end up paying. It’s important to understand the posted interest rate is a place to start your negotiating.

The best rates are usually reserved for buyers with the best credit. The more qualified you are, the more negotiating power you will have. Lenders seek low-risk buyers because there is a higher chance that such buyers will pay the loan back without issue.

3. Always shop around for the best terms

Shopping around for a mortgage is one of the best ways to get a good rate. By getting quotes from multiple lenders, you can find the best terms available to you.

However, make sure to do your shopping all at the same time. If you gather rate quotes within a period of a couple of weeks, your credit score is unlikely to suffer a big hit. By contrast, stretching rate quotes out over a longer period might damage your credit.

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4. Keep an eye out for hidden fees

Mortgage lenders sometimes advertise low interest rates to get customers in the door. However, potential borrowers might not realize that the low rate also comes with discount points and other fees.

Check your loan carefully to make sure you're getting a complete picture of your costs. A low rate won’t save you as much as you think if you are paying excessive fees.

5. Understand who controls closing costs

Lenders don't control all closing costs. For example, escrow fees include things such as property taxes and homeowners insurance premiums. The lender has nothing to do with these fees.

That means the estimate a lender gives you for closing costs might be lower than what you will actually pay. Be aware of this possibility and financially ready to pay a bit more than you expect.

6. Consider using a mortgage broker

Mortgage brokers access mortgage products from a wide variety of lenders all at once. Rather than getting individual quotes from each bank, you can use a mortgage broker to compare costs and rates from multiple lenders.

A broker may also alert you to first-time homebuyer programs or other cost savings available in your area.

7. Work on raising your credit score

Your credit score usually reflects your ability to manage and pay back your debt. That means raising your credit score can help you secure the best mortgage interest rates from lenders.

You can improve your credit score by making on-time payments, reducing your balances, and keeping lender credit inquiries to a minimum.

8. Consider locking in your rate

Locking in your rate means that it won’t change before your closing. Mortgage interest rates change daily, so until you’re locked in, your rate is subject to change.

Locking in a rate could save you money, especially if interest rates increase before your closing date.

Bottom line

Whether you're refinancing an existing mortgage or buying a home for the first time, negotiating your interest rate can save you thousands of dollars over the lifetime of your loan.

You can use that extra money to help pay for your bills or save for retirement. Keeping the items on this list in mind can help improve your odds of securing the best mortgage rate.

Money tips that can work for everyone

No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.

Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.

Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.

Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).