Interest, for the most part, represents the real cost of a home loan in Utah. Although it is negotiable, the “down payment card” is usually the most acceptable and viable bargaining chip. After all, shouldering a higher percentage of a property’s price literally decreases the financial risk a lender has to take and symbolically demonstrates your ability to repay a mammoth debt. But honest mortgage brokers in Salt Lake City will attest that there are many strategies useful for negotiating for a lower interest rate without having to go beyond the minimum loan-to-value ratio requirement. Below are some of the most effective ones that you should consider:
Cross the Next Credit Score Range Up
Even the most conservative mortgage lender will find it hard to say no to your interest reduction request if you have high FICO scores. These three-digit numbers are the sum of your payment and credit usage histories over the years, along with other metrics for debt management. Naturally, borrowers with poor credit have the least power at the negotiating table. If you are familiar with your FICO scores before taking to lenders, you can find out how close you are to moving to the next credit score range up.
If you are just points away from being categorized as “fair” or even “good,” take the time to reach the subsequent level. Improving from a credit score of 660 to 700 could compel your prospective lender to decrease your interest rate by up to 0.375% if you ask.
Shop Around
Thanks to financial technology, the mortgage lending sector has been extra competitive. Now, traditional financial institutions have to compete against online lenders. They can offer more favorable interest rates, impose fewer closing costs, and provide faster customer service because they contend with less overhead.
Get as many quotes as you can to start a bidding war. This will work wonders only if you have good credentials. Make sure that your credit makes you an irresistible customer. Also, rate-shop over a short period to make sure that FICO will count all of the hard inquiries performed under your name as one.
Buy Discount Points Using the Seller’s Money
If your seller is willing to shell out for your closing costs, make the most out of the contribution. If the donation goes above the threshold, use the surplus to pay for discount points and buy down your mortgage rate. These points serve as prepaid interest (otherwise known as profit made in advance), so a lender may feel more motivated to accept the excess seller contribution.
Go Hybrid
If a hybrid adjustable-rate mortgage is on the table, strongly consider applying for this loan. Its interest is both fixed and relatively low, something every frugal borrower hopes for. While it is bound to change when the introductory period is over, refinancing your mortgage in the future is always an option.
Lock It In
Last but not least, locking an attractive mortgage rate protects it from any interest movement in the industry. A locked-in rate has an expiration, but you are allowed to ask for an extension if you need more time to close.
Understanding how mortgages work is not an easy task because they involve lots of moving parts. If you advance your knowledge of these loans, though, you can uncover and devise new ways to beat the system to snag the lowest interest rate that you can qualify for.
