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When you’re searching for a mortgage, you don’t have to sign with the first bank that offers you a deal.
Mortgage rates vary by lender — so shopping around and comparing offers can help you pinpoint a lower rate and save money over the life of the loan. Nearly half of homebuyers stop after getting just one rate quote, according to a study by Freddie Mac. But by taking a few extra steps, you could potentially save thousands on interest costs.
Here are five ways to negotiate your mortgage rate:
- Compare rates from multiple lenders
- Improve your finances
- Ask for a rate match
- Use discount points
- Bonus: Lock in your rate
1. Compare rates from multiple lenders
In the Freddie Mac study, homebuyers who got at least one additional rate quote saved $1,500 over the loan’s life, on average. Getting five quotes doubled average savings.
When you’re shopping for a mortgage, you should compare rates from multiple lenders. But keep in mind: The lender with the lowest interest rate might not be the best deal when you add up the other costs. So compare interest rates, closing costs, fees, and any discount points included in the estimates.
Credible can help you compare loan options from multiple lenders in just a few minutes.
Learn More: 4 of the Best Mortgage Lenders
2. Improve your finances
Having a strong financial footing can help you score a great interest rate. Generally, lenders give the best interest rates to borrowers with a credit score of at least 760 and a debt-to-income ratio of around 45% or less.
You can also lower your DTI by: Additionally, a larger down payment can put you in a more favorable position with your lender. Because your mortgage is smaller, the lender takes on less risk. Some home loan programs allow down payments as low as 0% to 3.5% — but a lender may lower your interest rate if you can manage a larger amount. In the table below, you can get an idea of how much more you might pay in interest over the life of a loan with a poor credit score, based on a $200,000 home loan. In today’s market, plenty of lenders are competing for your business — which puts you in a good position to negotiate. Armed with your rate quotes and strong financial position, start by asking for a rate match. This part is easier if you have loan estimates, which lenders must provide within three days of applying for a mortgage. With this document, you can do an apples-to-apples comparison of every fee the lender will charge and determine where it makes sense to negotiate. But remember that even if you can’t get a lower interest rate, you might be able to haggle on the closing costs. When a lender gives you an estimate, the rate may include discount points. These are optional fees you can pay the lender to slightly lower your mortgage rate. Typically, one point costs 1% of the home value — so you would pay $1,500 to buy one point on a $150,000 loan. How much the point lowers your rate will vary by lender. Because it can take several years to break even on the cost, discount points can be a good option if you know you’ll be in the home over the long haul. But you should know whether this cost is baked into your rate, so you can decide whether you’re OK with paying it. Check for discount points on page 2, Section A of your loan estimate. Once you’ve found a great mortgage rate, consider locking it in. A mortgage rate lock is a guarantee from your lender that your interest rate won’t rise for a specified period. Since mortgage rates can change by the day and even the hour, a rate lock protects you from fluctuations in the market. If you lock and then rates increase, you still get to keep your low mortgage rate. But the opposite is true, too. If rates drop, then you may miss out on the lower rate. Check mortgage rates: A mortgage loan could be the biggest transaction you’ll ever make, so it’s important to keep your costs down when possible. You should always try to negotiate down to a better rate — doing so can potentially save you thousands of dollars in interest costs. While you may not always be able to find a lower rate, it’s also important that you compare multiple lenders before accepting a rate. Credible makes comparing multiple lenders easy. You can see loan options from our partner lenders in just three minutes.
Credit score Interest rate Monthly payment Total interest paid
760-850 3.065% $850 $106,085
700-759 3.283% $874 $114,654
680-699 3.456% $893 $121,546
660-679 3.666% $917 $130,021
640-659 4.088% $965 $147,402
620-639 4.624% $1,028 $170,137
Note: All numbers here are for demonstrative purposes only and do not represent an advertisement for available terms. This example is based on a $200,000, 30-year loan and the interest rates as of Jan. 13, 2022. Calculations were made using the MyFico loan savings calculator.
3. Ask for a rate match
4. Use discount points
Bonus: Lock in your rate
Why you should always negotiate
