You’ve contacted a few mortgage companies, compared your options, and completed an application to get prequalified. Now, you’ve received a response back from your chosen lender and you’re wondering, is your home loan interest rate set in stone? Is it possible to negotiate? Here’s what you need to know.
Negotiating Your Home Loan Interest Rate – Is It Possible?
Yes, it’s possible to negotiate your home loan interest rate. Although it might seem like rates are fixed and non-negotiable, there is actually some flexibility, especially if you have a strong application.
Every lender is different, and not all will be open to negotiation but some will. It’s always worth asking and presenting your case. If you have a solid application and you’re willing to do a bit of legwork, you could secure a significantly better rate on your mortgage loan.
Tips for Getting a Better Interest Rate Offer
Securing a better interest rate on your home loan can save you thousands of dollars over the life of your loan. Here are some tips to help you get a more favorable offer:
- Boost Your Credit Score: Lenders offer the best rates to borrowers with high credit scores. Pay down your debt, make all your payments on time, and correct any errors on your credit report to improve your score.
- Save for a Larger Down Payment: A larger down payment reduces the lender’s risk and can help you qualify for a lower interest rate. Aim for a down payment of 20% or more if possible.
- Shop Around and Compare Offers: Don’t accept the first interest rate you’re offered. Apply with multiple lenders, including banks, credit unions, and online lenders, to compare rates and fees.
- Negotiate with Lenders: Use the quotes you receive from one lender as leverage to negotiate a lower rate with another. Don’t be afraid to ask lenders to match or beat the best offer you’ve received.
- Consider the Loan Type and Term: The type of loan (e.g., fixed-rate, adjustable-rate) you apply for and the term (e.g., 15-year, 30-year) can affect your interest rate. Shorter loan terms typically have lower rates but higher monthly payments.
- Lock in Your Rate at the Right Time: Interest rates fluctuate, so if you see a good rate, consider locking it in. A rate lock can protect you from rate increases while your loan is being processed, but be sure you can close before the lock expires.
- Improve Your Debt-to-Income Ratio (DTI): Paying down debt can improve your DTI ratio, which lenders use to assess your ability to manage monthly payments. A lower DTI can help you qualify for a better rate.
Explore Your Options
Looking to compare your options for a home loan? Give us a call! We will be more than happy to discuss interest rates and terms with you in detail. We look forward to hearing from you soon!