How to Negotiate a Mortgage Interest Rate

Mortgage interest rates can be negotiable if you know how to deal with lenders.

Negotiating the interest rate on your mortgage is not difficult if you put in some extra time and effort. Applying to more than one loan source will give you a better chance of getting a low interest rate. Make the different lenders compete for your loan business by having them try to outdo each other, and then choose the one that offers you not only the lowest interest rate but the best overall loan.

Instructions

1. 

   Research mortgage interest rates online.

   Check online at a source such as Bankrate.com for the current mortgage interest rates offered in your area (see Resources). Write down the phone numbers of the lenders with the lowest rates, and then search for other mortgage lenders that are outside of your town. Compare your local interest rates with those of the other sources you find to see if it may be worth applying with a lender that is not local.

2. 

   Contact a variety of mortgage lenders.

   Call the lending institution that is your first choice, and speak with a mortgage loan officer. Ask him if the interest rate you saw online is still in effect, and find out if there is a time limit to lock in the rate. Have the lender explain the application process and the down payment that is needed to receive the lowest interest rate.

3. 

   Compare offers from a number of lenders.

   Get in touch with the other mortgage lenders on your list, and find out the loan specifics each is currently offering. Compare the loan packages from the different lenders you have contacted, and remember to include all of the closing costs. Narrow your choice down to the best two lenders.

4. 

   Fill out the mortgage paperwork.

   Contact the lender with the best total loan package, and inform her that you are interested in applying for a home loan. Fill out the mortgage application, and submit it for approval. Call the second lender and tell him you have already applied for a mortgage with a different institution but you would also like to apply with him, and have an application sent to you for completion.

5. 

   Negotiate for the best interest rate.

   Call the first lender back, and find out the interest rate she approved for your loan. Tell her you also have an application in process with a second lender but have not heard back from him yet. Let her know that you are going to choose the lender with the lowest interest rate, and inform her that you will be back in touch once you receive the other loan approval information.

6. 

   Close on your mortgage loan with the lowest rate.

   Find out from the second lender what interest rate he can give you. Tell him that the rate is higher than what you have been offered, if it is, and that he will need to give you a better rate if he wants your business. Contact the first lender and give her a chance to lower her offer, and then choose the one who gives you the best deal.

Tips & Warnings

• Ask your lender if you can get a lower interest rate by having your monthly mortgage payment automatically taken from your bank account.

• Apply with multiple lenders on the same day to avoid possible delays in receiving an approval for your mortgage.

References

• Investopedia: Financing Basics for First-Time Homebuyers
• Investopedia: 4 Steps to Attaining a Mortgage

Resources

• Federal Reserve: 5 Tips for Shopping for a Mortgage
• Bankrate: Find a Mortgage Rate