As of this writing, the average credit score in America has reached an all-time high…
When shopping around for a home loan, you’ll want to find a mortgage lender who can provide you with the most attractive deal possible. However, even once you’ve found the most suitable option you can qualify for with your credit score, you’ll want to know, “Can my mortgage be negotiated further?”
And most of the time, actually, yes. You can.
After all, your loan will bring more business to your chosen lender. And while this institution might have some power over you due to your financial need, you can always turn around and choose a competitor. This is something they might want to prevent at all costs.
Today, we’re going to give you some tips on managing your mortgage, so you can decide which loan options will better help you never skip out on a monthly payment.
Types of Mortgages
When you want to buy a home, it seems pretty straightforward that you will need to get a mortgage because monthly payments are just so much easier in the pocket compared to paying outright in cash. However, there are also many different types of home loans out there. And it may depend on your choice how light your monthly payment will be on your wallet.
One of the first criteria you have to consider when you need to buy a home using a mortgage is if you want your mortgage insured by the federal government. If you prefer a mortgage that a private lender backs, then a conventional loan is what you’ll be getting.
A popular kind of conventional loan is the jumbo loan. It is essential to know that the Federal Housing Finance Agency sets limits on loans and jumbo loans are traditional loans that significantly exceed these limits.
One aspect of conventional loans that might affect you decide that you have to pay private mortgage insurance when your down payment is below a fifth of your house’s purchase price. This option is geared more towards a borrower with a good credit score and a steady income stream.
The opposite of conventional loans is government-insured mortgages.
Three federal government institutions can back your loan if you are eligible. You can get FHA loans from the Federal Housing Administration. Military service members can also secure VA loans from the Department of Veterans Affairs, which offer a better deal than most. Finally, if you live in a rural area, you might qualify for a USDA loan from the Department of Agriculture.
All of these options can give you more wiggle room if your credit score is not up to scratch. A government mortgage can also offer a lower interest rate; however, this may mean that your total payments made by the time you complete will be more expensive. Most government-backed mortgages will also oblige you to pay mortgage insurance premiums.
Fixed-Rate Mortgage and Adjustable Rate Mortgage
When you manage your mortgage, your following criterion is deciding if you should apply for a fixed rate or an adjustable interest rate. This will usually be dictated by the economic climate when you are applying for a mortgage.
A fixed-rate can protect you if the interest rate increases. However, throughout the loan’s life, mortgage rates can go down, and you can end up losing money. When that happens, you can apply for an adjustable interest rate, which means your monthly payment might increase or decrease as the economy weathers on. When you feel that the interest rate has stabilized, you can apply once more for a fixed interest rate.
To get you started understanding how the loan application process works, let’s take a look at the highest volume lender in America, Quicken Loans.
As we try to survive the coronavirus pandemic ravaging the world, most people have switched to doing most of their business online as a safety precaution. The loan process is no exception. If you happen to be interested in getting a mortgage with Quicken Loans, you’re most likely to use Rocket Mortgage, which is their online mortgage application. You can even start making your monthly payments through Rocket Mortgage after your home loan gets approved.
With Rocket Mortgage, buying a home is just a few taps away on your mobile phone. They aptly named it due to their claim that you can get approved for a home loan in as fast as 8 minutes, which is the same amount of time a space shuttle takes to reach orbit. Regardless of this claim’s veracity, however, it doesn’t take much to apply for a mortgage through Rocket Mortgage.
How Rocket Mortgage Works
Since you will be applying for a loan, it is understandable that they will ask for a lot of personal information, most notably your finances. Lying to lenders will never work in your favor. It’s not enough to judge your mortgage application on your credit score alone. A place of concern that some might encounter here is the part where you have to entrust your bank passwords to Quicken Loans. Still, these are necessary to verify that you are entering correct financial information. You can always change your passwords once the whole process is finished; in fact, you will be left with no other choice.
So from home mortgage application to approval, and even on your subsequent monthly payments, you can do everything over the internet. With Quicken Loans’ online mortgage solution, you will not have to talk personally to your lender representative. This makes one of the most complex decisions American adults make in their lives much easier to accomplish. However, it does omit the traditional interaction necessary if you would like to negotiate your mortgage.
How to Negotiate Your Mortgage
As a borrower, your negotiating power will come from the strength of your application. But there are also a few things you can do to make the odds rule in your favor.
- Find out the minimum credit score that each lender considers. This is where borrowers need to find ways to increase credit scores. These might include:
- asking for a credit limit increase, if you have a credit card
- paying off some of your debts in full
- getting your credit report to check for errors
- making it a habit to pay your bills on time
- Window shop for lenders to know their mortgage rates and fees. There are so many loan options out there, but some people do not take advantage of research benefits. Different lenders offer different interest rates, which include other fees that they require. When you decide to purchase a mobile phone or gadget, you can look around for the one with the best features that give you more bang for your buck. Even credit cards offer different fees depending on the issuer. The same goes for mortgages. You might be surprised to find out that most borrowers end up availing the services of the first lender they talk to, without any idea what competitors might be offering. Don’t make this mistake! Shop around the way you might at a local mall. If you ultimately decide not to go with the lender with the most desirable terms, you can still arm yourself with this information as leverage when you approach your preferred lenders. As long as you qualify for the competitors’ options, these will work to your advantage when you negotiate.
- If you do not plan on selling your house once you have paid off your mortgage, you can also consider buying discount points to lower the total cost. One discount point can be equivalent to one percent of your loan amount. Take note that this will work best for a fixed-rate mortgage. If you get an adjustable-rate home loan, it will only work on your mortgage’s initial fixed-rate period.
It is crucial to keep in mind that the interest rates advertised might not include all other fees imposed for home loans. Though we are protected from unjust practices via the Truth in Lending Act, it’s in our interest and part of our due diligence to inquire about these as a borrower. Talk to different lenders and make sure you get the lowdown on all their loan terms.
We hope we were able to clear some of the cobwebs away from your mortgage confusion. There’s no need to settle on the first interest rate offered when you look for personal loans. If you still don’t have the confidence to bring your argument to the bank, remember that you have power as a borrower, and there will always be other loan options out there.
Are you ready to manage your mortgage?