How to Make Mortgage Lenders Compete For Your Business

In addition to selecting a career or job, getting married, and deciding to have kids or not, buying a home is one of the most important financial decisions in your life. When you buy a home, normally that means taking out a mortgage, and negotiating a mortgage for the best rate is an absolute necessity because in all likelihood you’ll be paying it off for many years. The rate at which you get a loan can be a burden or a blessing, so it pays to shop around and theinternet can help you do that. Over the length of a typical home loan, people pay the mortgage company many times the face value of the loan, so a small difference in mortgage terms, rates and negotiations can make a big difference in your monthly payments.

Let’s be frank. Banks and mortgage lenders want your business and need your business, so don’t be afraid to negotiate better terms than they first offer or post, especially if you have a good credit rating and sufficient down deposit. They don’t want to spend time on a loan that looks profitable but might slip away, so let them know you’re shopping around for the best deal possible. Do everything in your favor to let the mortgage lender know that you’re looking for a good deal, or you’ll walk.

Regardless as to what anyone tells you, mortgage rates and loan terms are not fixed in stone. A mortgage – whether it’s a home purchase, a refinancing, or a home equity loan – is a product, just like a car, so the price and terms are usually negotiable to some extent. Therefore, negotiate for the best deal you can get. Even a tiny bit better on the loan’s interest rate can save you thousands of dollars over the long run.

Here’s how to go about getting the best deal. The first step is to obtain your credit reports from all three credit bureaus – TransUnion, Experian and Equifax – and check them for accuracy. Approximately half of credit reports contain errors, so look at them carefully and contact the agencies to correct any mistakes you find. If you don’t correct them you could end up paying more for your home loan, or even be denied a mortgage. If your credit report contains negative information that is accurate, but there are good reasons for trusting you to repay the loan, be sure to explain your situation to the lender when it comes time for negotiations.

Remember that home loans are available from several different types of lenders including mortgage companies, commercial banks, thrift and savings institutions as well as credit unions. You should contact several lenders among these different types to try to get the best price for your loan. There are basically two types of mortgage loans you can find: conventional loans and government loans which include FHA, VA or RHS (Rural Housing Service) sourcing. The second step in your search after correcting your credit history is to determine which of these two types of loans you will apply for. You must also ask yourself some questions before you shop for a loan, such as how long you plan to stay in the home before you move, what’s the largest monthly loan payment you can afford, how much is the down payment, and whether your income will remain stable or you expect it to change over thee time you stay in the house. When yo get to the negotiating phase, punching this information into a loan calculator can help you determine what loan deal looks best.

In searching for a mortgage yourself, you must understand that mortgage rates fluctuate all the time so that the time at which you get the loan can mean a drastically different monthly payment. By watching the overall market trends for your state and locality, you can see the approximate interest rate you are likely to pay when you begin loan negotiations. Once you know the apporximate interest rate, the third step to securing a loan is investigating the market more thoroughly to make some simple comparisons between the rates various lenders are offering.

Different lenders may quote you different prices, so you should contact several lenders to make sure you’re getting the best price. You can also find a home loan through a mortgage broker who will have relationships with many different lending institutions. Brokers perform this service for a fee. Brokers will generally contact several lenders regarding your application, and their ready access to multiple lenders can mean a wider selection of loan products and terms from which you can choose. However they are not obligated to find the best deal for you, just a lender. Therefore, be sure to ask how the broker will be compensated so you don’t get stuck with a surprise expense should you use one. You’ll want to know all the costs involved in obtaining your home mortgage because negotiating with that knowledge may save you thousands of dollars.

Make sure you look at the entire cost of the loan including fees and points, by asking the lender or broker to write down all the loan parameters. Then start negotiating. Ask if the lender or broker will waive or reduce any of the quoted fees. Ask whether they’ll agree to a lower rate or fewer points for the loan. You’ll want to be careful that the lender or broker does not agree to lower one fee but raises another. Be sure they don’t lower the loan interest rate but raise points.

Lenders almost always have the power to waive certain fees but just make sure they substitute one or raise one for the one they waive. They’re trying to make as much money as possible for the institution, and you’re trying to arrange an affordable loan package where you pay as little as possible. There’s a lot of money at stake and they want your business as much as you want a loan, so there’s no harm in asking lenders and/or brokers if they can give better terms than the original ones quoted. Int he negotiations, be sure to bring up any better terms you have found elsewhere. Negotiating may sound like a headache, but it’s absolutely worth the effort. The better credit risk you represent and the more information they recognize that you know, the more willing lenders are to compete for your business. You want there to be competition!

When you’re satisfied with the terms of the loan and believe you’ve arrived at the best possible deal, the final step is to get a written lock-in by asking the lender to write down all costs. The lock-in will protect you from increases inthe interest rate while your loan is being processed. Now if interest rates happen to fall during this time, the lock-in can work against you but most lenders will work with you if this happens.

Obtain Information From Several Lenders

That’s how you do it, so where do you get started? How do you find lenders to compete for your business? Today most people use the internet to get started. By filling out a short application (it takes about 30 seconds), you can put yourself out there without any risk or obligation and before you know it, national and local lenders will come knocking on your door with all sorts of loan offers for you. Using the internet and about 30 seconds worth of work, you get them to make the first offers. It’s the best way to start the process and get lenders competing to give you the best deal on your home loan. Click on the link below to get started with The LendingTree network includes 8 of the 10 largest lending institutions…


One Response to “How to Make Mortgage Lenders Compete For Your Business”

  1. peter mac ardle says:

    Most companies will not give you any real information on closing costs, even though you pay them a retainer up front, how many retainers must I pay for “for competition” and furthermore one has to go to the “settlement” and still no information is available in order to compete with other companies because of this exclusive practices imagine buying a stick of gum this way?

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