By Joe Silver
The mortgage industry has been under intense scrutiny since the financial market crash nearly a decade ago. Today, there are new consumer protection laws that allow home-owners and potential home buyers to have an easier time finding a less expensive mortgage with lower home loan rates and to make things more transparent when looking for a loan.
The new consumer protection rules do reduce the borrower's ability to negotiate for a lower rate in many cases. But you still may be able to get a lower home loan rate with some effort.
One of the ways you used to be able to do this was to simply shop around. You see, there were three ways that a mortgage loan officer could typically increase what they earn:
Under this system, mortgage lenders had an incentive to offer you the highest rate to maximize their commissions and revenues to the lender. In many cases though, the customer was not treated fairly.
Some clients were getting high rates and some low rates. In some cases, the officer would lower closing costs but not always.
Today, things are different. Lenders cannot charge different home loan rates and fees to customers with a similar income and credit profile. Loan officers get the same commission regardless of what home loan rates or fees are charged to the consumer.
Even though the rules have changed and lenders cannot charge similar home buyers different rates, you still can make out better shopping for loans if you shop around. The rate that you get from one bank could be different than the home loan rate you get at another bank. And there is some wiggle room on closing costs.
For example, lenders can credit closing costs in some cases to the borrower when the delay causes a rate lock to expire, or if it is needed to be competitive.
The big thing that is different though today is that the commission for the loan officer cannot get increased in the mortgage rate and closing cost negotiations.
If you are able to reduce your home loan rate and closing costs, it will reduce the income to the lender but not to the loan officer. This maintains the loan officer's interest with the home buyer, and that makes the system more honest.
There are some closing costs that you cannot really change. For example, , appraisal fees, credit report fees and flood certification are pretty much set in stone.
However, there are some other closing costs that you can indeed negotiate on. You can always, for example, shop around for your title insurance policy, in most states. Texas is one exception as all title companies must charge the same by state statute.
Also, you may shop around for your home inspection, survey and home owner's insurance. The mortgage lender must give you a list of providers that you can choose from, but you do not have to use those. If you do locate a company that has a lower price but is not on the list, you should ask the lender if the firm meets their qualifications.
Some home buyers in some states have stated that they were able to negotiate on lender fees. Loan origination fees will vary based upon many factors. They could be negotiable in a dollar amount or in a lower interest rate.
One thing to try, experts advise, is to ask if any of the lender fees can be reduced or waived. Some have found that the application fee may be waived.
Further, remember that you are free to choose any lender you like. You can apply at several mortgage companies to see which one offers you the lowest home loan rates and lending fees.
Each lender should provide you with a list of the fees that they will charge to do your loan, as well as closing costs. You can compare and contrast them, and use your loan shopping to find you the lowest rates and closing costs.
You do not have quite as much ability to negotiate for better home loan rates and fees today when shopping for a mortgage. But there are still some ways to save money, as we noted above.
One of the best ways to have more negotiating power is to have a good income and credit score. If your credit is in the 750 and higher range with adequate income, you will be able to qualify at almost any lender. This is even more the case if you can put down at least 20% on your mortgage.
Being a highly qualified buyer will put the ball in your court, allowing you to play several lenders off one another.
And remember, the best rates and fees will go to the mortgage shopper who applies for several loans at various lenders. You should find that different lenders charge different fees and the rates for the same loans can be different as well.
FirstTimeHomeFinancing.com does not advertise home loan rates or credit on mortgages for consumers. This is a website that offers information about house financing and does not guarantee rates or pre-qualification directly or indirectly through representatives or agents. FirstTimeHomeFinancing.com provides a news and information service by offering editorial content related to the housing and mortgage industry.
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