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Can a Mortgage Note be Negotiated?

By Mary Lamphere

Several different types of lenders including commercial banks, mortgage companies and credit unions provide mortgage loans and each has their own requirements, rates and fees. Before you decide to follow through with a particular purchase decision, make sure that you have shopped around, compared rates and taken the time to negotiate your mortgage to secure the best possible terms. If you don't think that you had any pull when it comes to negotiating a mortgage note, think again!

Lenders offer different prices almost every day of the week so negotiating the best deal that you can is always an option. You may talk with a lender one day who is providing a loan at a set term and then later on they may be offering better rates for the same loan terms. Some lenders will even provide different deals to consumers that have the exact same loan qualifications. Keep in mind that many lenders are allowed to keep the difference in the loan amounts that they recuperate as additional compensation which means that there is almost always room for a variance in your favor, all you have to do is know what types of overages to look for and where to start negotiations.

Points

The fees that are paid to the lender are considered points and they should be the starting point for mortgage note negotiations. Typically, the points are attached to the interest rate so if you pay in more points to the lender you will get a lower interest rate. In order to ensure that you have found a loan with competitive rates, review the rates and points that are currently being offered at local lenders and then prepare for negotiations with your lender of choice. Having points quoted in a dollar amount rather than a standard point amount will help you to determine what the lower interest rates will actually cost you.

Ask the lender to lower the points, or to accept fewer points in return for a lower interest rate. Keep in mind that a lender may agree to lower one fee but raise another. For instance, lower points could result in higher interest. It's important that you make sure you are receiving both lower points and the lower interest rate in order for the negotiation to have been beneficial to you.

Fees

There are a number of different fees associated with a home loan including origination fees or underwriting fees, closing costs, settlement costs and broker fees. Most of the time, these fees can be negotiated, especially the fees that are paid in closing. Ask your mortgage lender for a breakdown of all fees associated with the loan and then you can begin negotiations.

Sometimes, the fees associated with a mortgage can be rolled into the cost of the purchase. While this may seem favorable, there is usually a connection to interest rates with this type of "no cost" loan. Instead of having fees rolled in and paying higher rates, consider talking with the lender about lowering the fees for items such as appraisal, closing, loan origination or other items that are provided to you in the list of fees.

Locking in the Rates

Once you've come to terms with the negotiations, and you're happy with the terms set forth by the lender, you should lock in the rate. Some lenders will require a fee from you to cover the cost of locking in the rates that you have secured. In many cases, even this fee can be reimbursed at closing.

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