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Negotiate For The Best Home Mortgage Loans Terms. Here's How
By EchoBay Loans Staff Writer

When you are shopping for a home mortgage, information is your new best friend. You will need to do some research about your current lender as well as their competitors in order to be able to negotiate. If you want to negotiate for the best home mortgage loan in the market, you must first know what is the best and what is negotiable.

Negotiating Fees
There are many fees that lenders charge on your home mortgage that are negotiable. Just by asking, it is possible to get these fees lowered or waived all together. If you have information from the competition showing lower fees, you are in an even better position to negotiate.
Common fees that can be negotiated include documentation fees, attorney fees, origination fees, points and interest rates.

These fees can add up quickly when you are buying a new home. Documentation fees and attorney’s fees can run several hundred dollars each. Points and origination fees are both usually set as a percentage of the home mortgage loan. In the case of a $100,000 loan, just a .5% difference in one of these fees can save you $500. Interest rates are also negotiable. Even the smallest change in interest rates can save you a large amount of money over the life of a loan. On that same $100,000 loan, negotiate a 6.5% rate instead of 6.75% and you will save close to $6,000.

Negotiating Clauses
In addition to these fees, you also need to be aware of other clauses in your contract that could cost you in the future. Prepayment penalties are usually stated as a percentage of the loan amount. Even if you plan to stay in the home for the duration of the loan, it is important to have this clause removed or at the very least the penalty percentage reduced, just in case your plans change.

Another clause that is common is an interest rate increase in the case of a late payment or default on the loan. If for whatever reason, your payment is made late, your lender reserves the right to increase the rate of your home mortgage loan (sometimes to as high as 18%) and the rate remains that high for the rest of the loan. While this may be understandable for the borrower who chronically makes late payments, it can be extreme for the borrower who makes one late payment over the life of the loan. Even if you cannot have this clause removed, try to negotiate to make the terms a little more lenient.

How To Negotiate
Arm yourself with information. In order to negotiate effectively, you must know what your lender’s competitors are offering. This information can be easily obtained from the Internet. Be honest about this information. Your lender is in the business every day and will know if you’re stretching the truth about the great deal you found.

Tell your lender you’re shopping - Don’t be shy about letting your lender know you are shopping for the best mortgage loan. Let them know that you have contacted several companies and will take your business to the one with the best deal.

Don’t be afraid to ask - In all likelihood, your lender is not going to start decreasing rates and fees if you seem content with the first offer. Speak up! The worst that can happen is the lender says no. You have nothing to lose and plenty of money to gain. Many pay higher rates and fees simply because they fail to ask if there is room for negotiation.

Use your past history - Are you a current customer of the bank? Do you have a perfect credit history? Do you have large accounts with the lender? These factors make it much easier for you to negotiate the best rates and terms. Be sure to remind the lender how valuable your relationship is to their institution. You can always say you will take your business elsewhere. They may make you a better deal if it’s seen as the only way to keep your accounts.

Don’t hold back about the future - If it’s possible you’ll be borrowing more in the future or you have a large deposit that may be headed their way soon, tell them about it. Having the possibility of more future business may just encourage them to sweeten the deal.

A home mortgage is a large investment and it should be one you undertake with care. In almost all instances, at least one item can be negotiated on your home mortgage loan. Talk to your lender and don’t be afraid to ask for a better deal. Once you sign the dotted line, you could have thirty years to think about what had happened if you had just asked.


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