What's Negotiable and What's Not for Mortgage Borrowers
What’s negotiable and what’s not? Plenty of mortgage blogs and websites will point out the obvious--home sale price, seller concessions, who will pay for corrections or repairs and to what extent, etc.
But what about the not-so-obvious details? Mortgage insurance, for example, is non-negotiable. To a point. You WILL be required to carry mortgage insurance on your FHA home loan in typical cases. But depending on how much you put down and the term of the loan (among other variables) you may have the option to cancel your FHA mortgage insurance after 11 years.
Some borrowers believe that interest rates are non-negotiable, but if you stop to remember that the rate you get offered is dependent on your FICO scores and other credit qualifications, that doesn’t seem as set-in-stone.
Negotiating Interest Rates
You can start “negotiating” a rate by working on your credit a year in advance of your mortgage. The better your credit, the better chance you have of being offered a lower rate. But you can also discuss purchasing an interest rate buydown (also known as discount points) to lower the rate.
You can also haggle with your lender about applying for an adjustable rate mortgage instead of a fixed-rate loan, but don’t do this without a plan or an exit strategy for when the first rate adjustment occurs.
You can negotiate rates and terms with a lender quite easily by calling five competing lenders and getting offers from them. Send the most advantageous quote you get to another lender and ask if they can beat it. That’s a form of negotiating that does not require you to commit to a lender yet.
The FHA appraisal is 100% non-negotiable. The home inspection is a voluntary expense, but if you purchase a house without having it inspected as a condition of your commitment, you are essentially buying a used car without ever having test driven it.
The down payment is 100% non-negotiable in the sense that it must be paid. It is up to you whether to seek out down payment assistance, help from friends and family, etc. Remember that down payment money is strictly regulated. Ask your loan officer for instructions on how to properly collect, store, and pay any down payment help you receive.
Hazard insurance may or may not be negotiable depending on where the home you want to buy is located. Those who want to buy a home in an area that’s a known natural disaster area may require it, while homes that are not in such areas may not. Don’t forget that if your insurance policy does not specifically mention a type of natural disaster by name you MAY NOT be covered.
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