4 secrets to successful mortgage negotiations
Dear Dollar Diva,
The Diva addresses closing costs and how much they should cost right after she talks about creditworthiness; first things first.
1. Your creditworthiness
For $12.50, you can get a copy of your FICO score and Equifax credit report. You’ll also get an explanation of the FICO score and what you can do to improve it in the future.
You should also get copies of your credit reports from the other two major credit-reporting agencies, TransUnion and Experian. The cost will vary, depending on where you live and whether you’ve been turned down for credit, but shouldn’t be more than $9 apiece.
It’s highly unlikely that your credit report will be perfect. The Diva’s ” How to fix my credit report” will tell you what to do if you find mistakes on it.
Knocking down unsecured debt and building up savings will make you more creditworthy, so start now. Cut your expenses, work overtime, sell stuff you don’t need and sock away your tax refund. Putting less than 20 percent down labels you “risky,” and lenders are risk averse. They may give you a mortgage, but they’ll make you pay for private mortgage insurance (PMI) to compensate for the perceived risk.
2. Closing costs
Bankrate.com recently did a study on closing costs and compiled a list of fees charged by lenders and mortgage brokers showing average, highest and lowest costs reported by the survey participants. For more on the survey and a link to the results read ” A close-up look at closing costs.” This is must reading.
When you’re shopping around for a mortgage, question every fee and ask if it can be waived or negotiated. After talking to a half-dozen lenders, you’ll know the answers before you ask the questions; that’s called knowledge, and knowledge is power when cutting a deal.
4. Mortgage ratesBankrate.com’s mortgage page will give you an idea of the going rate for a mortgage. But each mortgage deal is unique, and the only way you can know what your rate will be is by shopping around. Talk to at least a half-dozen lenders or brokers; anything less could hurt your pocketbook.
Your mortgage transaction will consist of the points, closing costs and mortgage rate you and your lender negotiate. Your lender knows the profit margin it wants to make on the deal and will juggle the three components to get there. You need to know what you want to pay for the deal so you’ll know when to dig in your heels and when to acquiesce. If you have sterling credit and enough cash to make a healthy down payment, you’re in the catbird seat.
For some more insights into the mortgage process read the ” 10 things every mortgage shopper should know.”
|— Updated: June 14, 2006|