Once you have finished your research and know what each lender has to offer, its time to negotiate for the best deal that you can get on your loan.
Lenders and brokers may offer different prices for the same loan terms to different consumers, even if those consumers have the similar loan qualifications. The most
likely reason for this difference in price is the fact that loan officers and brokers are often allowed to keep some or all of this difference as extra compensation. The
difference between the lowest available price for a loan and any additional amount that the borrower agrees to pay is called an overage.
When overages occur, they are generally built into the prices quoted to consumers. Overages can occur in both fixed and variable-rate loans and can be in the form of points, fees, or the interest
rate. Any price quoted to you by either a loan officer or a broker may contain overages, so you might be able to negotiate a lower rate.
Here are some steps you can take to negotiate the best deal you can when obtaining a loan:
- Have the lender or broker write down all the fees associated with the loan.
- Ask the lender or broker if he or she will waive or reduce one or more of its fees or agree to a lower the interest rate or fewer points.
- Be sure that the lender or broker is not agreeing to lower one fee while raising another or to lower the rate while raising points.
- Remember, there is no harm in asking lenders or brokers if they can give you better terms than the original ones they quoted or than those you have found elsewhere.
- Once you are satisfied with the terms you have negotiated, you should obtain a written lock-in from the lender or broker.
Locking in a rate or a lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. There may be a fee associated with locking in the loan
rate, which may be refundable at closing. Lock-ins can protect you from rate increases that occur while your loan is being processed; however, if rates fall, you could end up with a less favorable rate. Should
that happen, try to negotiate a compromise with the lender or broker.
Remember, you can save yourself thousands of dollars over the life of a loan if you take a little extra time and negotiate the best deal you can.