Use this trick to get a lower mortgage rate
Mortgage borrowers often see interest purchases as additional work.
But what if you could get mortgage lenders to work hard for you?
If you take the right steps you can get lenders to compete for your mortgage and negotiate a lower interest rate.
This continues to require efforts on your part. You need to get mortgage rate quotes from various banks and lenders.
However, with a little expertise, you can ensure that you are getting the best possible deal on your home loan.
Find a Low Interest Rate (Oct 21, 2020)
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Lenders will compete for your mortgage if you let them
You've probably heard it before: it's important to shop around and compare prices when buying a home loan.
"This is your best attempt at getting the best interest rate available," says Brian Martucci, Mortgage Expert at Money Crashers.
"It is true whether you are playing off each other's lenders in negotiations or simply choosing the best deal that is offered to you."
Believe it or not, it is even possible to pit lenders against each other and get a lower interest rate.
"When two or more lenders are fighting for your business, one is almost always willing to make less money than the other." –Grant Moon, CEO, Captain
"Lenders compete by offering different rates and fees," said Grant Moon, CEO of Home Captain.
"When two or more lenders are fighting for your business, one is almost always willing to make less money than the other."
Clifford Rossi, professor of finance in the University of Maryland's School of Business, explains the importance of engaging multiple lenders.
“You can't just get the best combination of interest rate and points,” he says. “A good lender will also help you find the best product – for example, a fixed or floating rate loan, a traditional loan, or a government-sponsored loan. "
Find The Best Mortgage For You (October 21, 2020)
How to get mortgage lenders to compete
Here are six steps you can take to get lenders to compete for your mortgage:
Gather multiple interest rates and written loan estimates. Determine your best deal by comparing the interest rate, loan type, term, monthly payment, and closing costs listed in each loan estimate. Take your best offer to your preferred lender and ask if it can match or outperform. You can do this by calling or simply sending an email with your competing loan offer attached. If they don't match or exceed your best offer, ask if they're moving into other matters like lowering their fees. Take your new best offer back to the first lender and see if they can match or exceed this new offer. If unsuccessful, try receiving interest rate quotes and written loan estimates from a new group of lenders and start the process again
That might sound boring, but it pays off.
If you cut your interest rate by just 25 basis points (0.25%), you can save around $ 30 per month or $ 360 per year on a $ 200,000 mortgage loan.
Check your new plan (October 21, 2020)
Start with multiple price offers
The trick to getting lenders to fight for your dollars is to make them aware that you are a potential customer.
In other words, you need to shop around and contact several different mortgage lenders.
“One of the most effective mortgage loan negotiation strategies is also one of the simplest and least involved,” Martucci explains.
“It requires several initial offers – in the form of interest rate offers – from various lenders. Then you need to put your lowest offer to that lender's competitors and see if they budge. "
"This is a version of the 'best offer' strategy that many car buyers use," says Martucci. "They are buying the lowest offer they have made to other dealers in the hopes of encouraging at least one to beat that offer."
Make sure you get written credit estimates from each lender
“Written (loan estimates) are a great tool that the lender must legally provide to you. So use it to make them compete, ”advises Moon.
If a lender doesn't match or beat a competitor's advertised rate, they may be willing to sweeten the deal in other ways.
“For example, they can compete by offering to speed up the mortgage process, lower their fees, or simplify documentation requirements,” adds Rossi.
First, check your credit score and finances
Karen Condor, a finance and real estate expert at USInsuranceAgents.com, says it is important to do your homework before you begin your tariff shopping.
"It's easier to get lenders to compete and be flexible about interest rates when you have good credit, a solid credit report, higher down payment, and low monthly debt."
"Work on getting these items in order beforehand," says Condor.
This ensures that you are in the best position to negotiate a low price and even cut closing costs.
Compare top refinancing lenders
Is it difficult to get mortgage lenders to compete?
The truth is that these days it can be more difficult to get lenders to get it for your dollars.
This is because mortgage rates stay at or near historical lows, so lenders have a lot of business.
"The low interest rate environment we are in now has many benefits for consumers and home buyers," says Martucci. "But it complicates efforts by buyers to get lenders to compete for their business."
“Current interest rate spreads – that is, lenders' profit margins – are narrow by historical standards.
"That means lenders have less leeway to cut interest rates without losing money," he explains.
Whether a particular lender is ready to vie for your patronage often depends on their particular loan volume.
"Of course, if a lender is busy, they'll focus on transactions that make more money," says Moon.
“But when a lender needs the business, they'll focus on all the deals. So the biggest challenge for a consumer is to find a competent lender who will want your business even after you bargain with them. "
What if I want to refinance with my current mortgage lender?
If you already own a home and are planning to refinance, you may want to start your search with your existing mortgage lender.
Some lenders offer loyalty discounts to refinance applicants.
"Make sure you ask about this before you take your mortgage elsewhere," says Martucci.
"These discounts can be especially common if you have significant funds on deposit with the lender or bank, even if you don't currently have a mortgage loan with them."
In other words, if you already have a high-yielding account with a bank that offers loyalty discounts, you can potentially get an ideal price.
Ask for an optimized refinancing
Homeowners on government backed loans (including FHA, VA, and USDA mortgages) have another great option for refinancing.
“Call your current lender when interest rates have fallen and ask them to make a rational refinancing. They are likely to comply with your request if you are a low risk borrower since losing yourself as a customer can be costly, ”says Rossi.
Optimized refinancing is a great way to lower your interest rate as these loans require little documentation and can be pipeline faster than traditional refinancing.
Don't limit yourself to your current lender
But even if you love your current lender, “you should still be looking for the best rate,” adds Moon.
In many cases, your current bank may not be the best option for buying or refinancing a new home because they don't specialize in the type of loan you need. Or their prices may be less competitive.
"Remember, your existing lender benefits from you, so don't be afraid to get quotes from other lenders," adds Moon.
Buy for a low mortgage rate. Start Here (October 21, 2020)
How To Find The Best Mortgage For You
Whether you're a first-time buyer or a current homeowner looking to refinance, don't just focus on the stated interest rate.
“Take a close look at the APR on your written credit estimate. This shows the full cost of the loan with additional fees, ”recommends Moon.
"Take into account all closing costs, the required down payment, discount points, prepayment penalties and also whether private mortgage insurance is required," suggests Condor.
Also find out how long it will take the lender to close your loan.
Make sure that the tariff lock offered – usually 30-45 days – is long enough to carry you through to the final day and guarantee a low fixed price.
More tips to help you find the lowest mortgage or refinance rate
The bottom line is that if you want to find the lowest refi or mortgage rate, you need to do some homework.
First, check current mortgage rates for an accurate benchmark.
"The more lenders you consider when buying mortgage rates, the more likely it is that you will get a lower rate," says Condor.
She also does research on loan products from various types of institutions to see what specific programs they offer.
Expand your search to include credit unions, regional or municipal banks, direct lenders and national banks.
You won't know which one is best for you until you've examined all of your options.
Check your new plan (October 21, 2020)