Can You Negotiate Mortgage Rates?

The answer to the question, “Can you negotiate mortgage rates?” is yes. It’s absolutely possible to negotiate better rates with mortgage lenders if you’re willing to haggle and know what to focus on.

Understanding how to negotiate mortgage rates could help you keep more money in your pocket instead of the lender’s. Here’s what you need to know.

When to negotiate mortgage rates

As a rule of thumb, it’s a good idea to negotiate mortgage rates when:

1. You’re buying a new home: Taking the time to shop around for a mortgage can save you thousands over the life of your loan. As you begin house hunting, gather quotes from multiple lenders before you apply for a loan.
2. You’re refinancing your existing mortgage: If you’re ready to refinance your mortgage, keep in mind that you don’t have to stay with your current mortgage lender. Although it may take more effort upfront, checking whether another company can offer a better refinance rate could help you save.

Mortgage rates are determined by multiple factors, including economic events. If rates are trending downward nationally, it may be worth contacting several mortgage lenders to see if you can qualify for a better rate. This is especially true if your credit score has improved since you first applied for a loan.

How to negotiate mortgage rates

1. Know where you stand financially

The first step is to have a firm grasp of your credit history and financial situation — it’s tough to negotiate the best mortgage rates if your credit score and debt-to-income (DTI) ratio aren’t in great shape. The stronger they are, the better position you’ll be in to negotiate mortgage rates with lenders.

How to review your credit history

You can request a free weekly credit report from each of the three major credit reporting bureaus at AnnualCreditReport.com. Reviewing your report can help you catch any errors that may be dragging down your score.

2. Determine your desired mortgage terms

Familiarize yourself with your available loan options and make sure you understand how the loan terms you choose will fit your budget and long-term financial plans.

For example, adjustable-rate mortgage (ARM) rates are typically lower than fixed rates initially, but could become less affordable later when they adjust to current market rates. Similarly, 15-year loans usually offer lower interest rates than 30-year loans, but your monthly payment will likely be higher since you’ll be repaying the loan in half the time.

If you aren’t sure which mortgage type is right for you, start by using a mortgage calculator to estimate your monthly payment and total loan costs.

3. Get quotes from multiple lenders

Once you know the type of mortgage you want, you can start rate shopping. It’s a good idea to get quotes — also called loan estimates — from at least three lenders.

Do your best to collect all your estimates on the same day and give each lender the same information. Like stocks, mortgage rates change daily. Keeping the details consistent can help you make an apples-to-apples comparison between lenders.

Don’t want to rate shop on your own? Hire a mortgage broker

A mortgage broker is a third-party financial professional who can gather quotes from multiple lenders for you, saving you time and energy. However, if you go this route, you’ll likely be charged a fee for the convenience.

4. Compare total loan costs

Compare each lender’s fees, in addition to the interest rate, with special attention to application and origination fees. Mortgage lenders often set these fees themselves, which means they can vary between companies and may be more flexible than other closing costs. Sometimes, lenders may be willing to lower these charges to compete for your business.

A helpful way to compare the terms and fees between lenders is to look at the annual percentage rate (APR) on each loan estimate. The APR reflects total loan costs, including fees, spread out over the life of the loan. The higher the APR, the higher the closing costs.

5. Negotiate with your lender

Once you have multiple quotes, start narrowing down your choices. Consider the numbers, as well as other factors, such as consumer reviews and whether lenders offer digital tools for their application process.

If your preferred financial institution doesn’t have the lowest rate, you can negotiate the mortgage rate by showing a competitor’s offer and asking them to quote a better rate or at least match it. Some lenders may be willing to lower their rate to gain your business.

Don’t have a mortgage lender? Check out our list of the best mortgage lenders to find your perfect match.

6. Consider locking in your interest rate

After you’ve decided on a lender, the only way to protect your best quote is to request a mortgage rate lock. A rate lock reduces the chances that your rate will increase before you close — as long as you complete the closing process before your rate lock expires.

Work with your loan officer to determine how long you should lock in your rate, and be sure you’re not required to pay any upfront rate lock fees.

5 tips to improve your mortgage rate negotiation strategy

Now that you know it’s possible to negotiate mortgage rates, it’s crucial to approach the mortgage process strategically.

1. Prepare your finances first. Borrowers with the strongest financial profiles — high credit scores and low DTI ratios — often receive the best rates. Take some time to ensure that both metrics are in good shape before you shop around.
2. Give yourself a deadline. If you drag out the process, you risk rates changing, which can make it more challenging to negotiate rates with multiple lenders.
3. Be mindful of ultra-low rates. Watch out for lender rate quotes that appear extremely low. You may have to pay hefty mortgage discount points and fees to get those lower rates.
4. Leverage customer loyalty. If you already have a relationship with a lender, use your existing customer status to your advantage. Your lender may be willing to negotiate mortgage fees to keep your business.
5. Get everything in writing. Keep each lender’s loan estimate on file. Having these loan terms in writing can put you in a better position to negotiate better mortgage rates with your preferred lender.