How to Negotiate Mortgage Terms

May 27th, 2009

As a smart consumer there are many ways to control mortgage costs and be certain of exactly what your home loan is costing–today and in the future. Mortgage costs generally are made up of two components; closing costs that are upfront and interest costs that are on the backend as you pay your loan each month. Mortgage brokers generally have some control over these fees and can often negotiate with consumers.

In regards to interest rates, be sure to ask your mortgage broker how they are compensated. Historically, brokers are paid based on “marking up” the mortgage interest rate. The good news today is that mortgage brokers are now required to disclose how much they are marking up a loan. Be sure to ask your broker this question! Don’t just take the interest rate at face value because your broker says it’s a good deal.

Within three days of accepting a loan application, lenders and brokers are requiring to issued a Good Faith Estimate of closing costs. Abbreviated as GFE, a Good Faith Estimate of closing costs is just what it sounds like–the lender’s best estimate of how much you will owe in order to obtain your mortgage loan. Again be sure to ask your loan officer to explain what each fee on the GFE is.

The easiest way to save money on closing costs is to shop around for lower prices on defective title indemnity insurance, title examination, title searching and attorney’s and settlement fees. It is legal to choose any company you want for any of these services, so don’t blindly agree to something from your broker without at least getting a few quotes from other providers.

There’s also money to be had by talking down your application, origination, processing, and document preparation fees. It’s legal to pass these fees on to the borrower but they are never set in stone.

The most important thing to remember is the simple fact that the ball is in the consumer’s court in today’s market. The mortgage market is depressed so it’s an ideal time to get a home loan with lower fees since brokers are hungrier than they’ve been for quite a few years.

Brandon Laughridge is a mortgage blogger for Mortgage Loan Place. MLP specializes in educating consumers on FHA Home Loans and VA Mortgages.