Do people have bargaining options when getting an interest rate on a mortgage loan?

Question

My wife and I are buying a home for around $210k in a rural town in VA. We went to a lender and were told that our interest rate would be about 6.5-6.8% and that it would be the same just about anywhere we went. We both have good credit (mid to upper 700's) and have a downpayment of $60k. The rate she quoted was for an interest only loan lasting 5 years. Given our good credit and downpayment, should we try to bargain for a better rate? Is this rate going to be the same every place we go? I just felt like she was trying to give us as little info as she could and making it seem like the rate she quoted us is our only option.

Answer 1

yes


-me

Answer 2

I can get you a better offer. That is definitely not your only option. I would NOT shoot for an ARM. She quoted you a 5/1ARM Interest Only. That mortgage is fixed for a 5 year period and then it will hit you with a big adjustment every 6 months or year, depending which one she puts you in. The thing with the option arm is say for ex: What is the interest rates just skyrocket to high interest rates right around the time your arm kicks in, you a.pay a high mortgage payment or b. try and refinance your home and get a lousy rate and a higher payment.

She didn't offer you a 30 year fix loan principal and interest rate because she knew the rates their bank had were high and knew you wouldn't go for it. Then she would lose your business.

My point is stick with a 30 year fix loan, principal and interest.
I get the best interest rates out there. I can get you a 6.375% on a 30 year fix loan principal and interest. No points. I wouldn't really try and buy down the interest rate, your payment would make like a $10 difference. Not worth it when you are paying $1000 to buy down for a lower interest rate. I reccommend a 30 year fix just because it sets a finish line for the borrower and you don't have to ever worry about the rate adjusting on you in the future if the market takes a tumble.

If you are intersted please feel free to email me.
[e-mail] (We are on the Lending Tree Network)

Answer 3

Hi! I am a Realtor. Stop Stop Stop!!!!! Did you watch the Market? Interest only loans? If the housing market continues to go down until 2009 you will have ZERO or very little equity in your home. AND 5 years, that is a hangman's noose. Please speak to a professional that can advise you how this in entrapment. Three years ago 10's of thousands of people in each State did interest only loans, now when the lender recalculates the new interest and principal added the monthly payments can double or more!! Please don't do this, my hubby is a Real Estate Attorney and does bankruptcies and be cannot keep up with the foreclosures on deals like this. The new Wells Fargo rate today was 8%. This will go across the board. Please, you are getting set up for a bad fall. Speak to at least 2 other lenders and get the facts. And ask about how the rates jumped today. Please do this, I would hate for you to get S****** because it sounds to good to be true....it is!! If you have any other questions, please ask!! Marie

Answer 4

First of all, Interest Only is NOT a good idea. This is not he right market for that anymore. If your credit scores are that good, look to other loan types. Try to get a fixed 30yr or 40yr conventional loan. In Virginia, their is VHDA Loans, do either of you qualify for FHA or VA? Push come to shove go no down with a 1st and a 2nd rather than Interest Only. You may want to look at other property a little cheaper, but the market right now is right where your lender said. Beware of those "lower" rates. A lot of time they are brokered out to a company that may be on the brink of bankruptcy. Always go with a reputable lender and remember, in parts of Virginia, once you place the name of your lender on a contract, you need the sellers permission to chnage lenders and read the listing, some sellers tell you outright - no brokered loans and/or local lenders only. Good Luck!

Answer 5

Yes to all your questions. However, if you are having the lender pay for closing costs, you can expect a higher interest rate. Brokers, direct lender's, and banks do not work for free. They have to make money somewhere. Typically when you want the lender or broker to pay the closing costs, they do not charge fees for compensation. They receive compensation from the lender in the form of a YSP (Yield Spread Premium). This is done by increasing your interest rate a little bit. They take these funds and apply them to the closing costs which pay for third party charges such as title & escrow fees, county recording fees, etc. Whatever remains after they deduct these fees is what the broker or lender makes on the loan. Brokers in most states must disclose any compensation they are receiving from thier lender to thier client at closing or before. Banks and direct lenders are not required to disclose this information. Keep in mind many seller's are very open to paying for closing costs if that helps the buyer purchase the property. Which way is best? That depends. If you plan on living in the house a long time, go ahead and take the lowest rate you can get and pay the closing costs or have the seller pay them. If this is a quick property flip then you will want to keep your out of pocket expenses as low as possible so the having the lender take care of the closing costs might be best. Take the time to sit down and get a few quotes from a few different lenders. Be sure to explain exactly what you are trying to do so they can best match you with the best program for your needs. Hope this helps.

Answer 6

Depending on how many points (origination fee, 1 point = 1% of your loan) you are willing to pay, the rates can vary. Yes, you can always negotiate your rates. It depends on the loan officer's willingness to make more $$ or less $$. Keep in mind, though, you may get someone who promises low rate, but can't close the deal.

Although you can pay points to lower your rate, you should find out how much saving would these upfront costs translate into. For example, if you have to pay 1 point ($1500, $210K less 60K down payment = 150K loan amount) and your interest rate will lower by 0.5%, that means the monthly payment will lower by $62.50. You can recapture your 1 point fee in 24 months. If you want to keep your home for more than 2 years, it maybe acceptable to do so. If not, then, keep $1500 to yourself.

Good luck shopping!

Answer 7

An interest only loan should have a lower interest rate than a conventional low -- not a higher one. That's why interest only loans are attractive -- the payment is lower in part because the interest rate is lower.

Let me ask you this: Is this a Stated Income or No Documents loan? Stated/No Doc loans have higher interest rates, and given your credit score and high down payment, it sounds like this is an unconventional loan. Did you provide W-2s to prove income? Do you have a regular job or are you self-employed? Are you able to document all of your income?


That's the only thing that makes sense, because otherwise this interest rate is too high for an interest-only loan.

Answer 8

You always have the ability to negotiate a better rate. Mortgage brokers, such as I am, DO set rates by raising or lowering the YSP (yield spread premium) that we receive on the back end.

However, rate is not everything. Service should be taken into consideration as well. If you were referred to this broker and know that she is credible, I would stick with her. The rate she quoted is competitive. Rates have been on the rise, so as long as you are not paying any points or origination fees, you've been quoted a good rate.

I caution, as others have, on the interest only though. Right now I would stick wtih a fully amortized fixed rate. That's what I'm recommeding to my clients right now.

Answer 9

I don't think its a matter of bargaining, so much as it is comparison shopping. We think nothing of shopping for shoes, clothes - even houses - but when it comes to mortgages sometimes it feels like you show up at a store that says "Mortgage" on the front, walk up to the front desk, they hand one over to you and tell you to just keep on moving. But you can comparison shop for mortgages the same way that you would for anything else.

Any reputable broker should give you a Good Faith Estimate and a copy of your credit report so that you can comparison shop. Ask for a copy of the Truth In Lending as well and use the APR at the upper left corner to guide you. Don't focus merely on rate, the costs are important - as well as trustworthiness. Look for someone who is a member of the National Association of Mortgage Brokers and their local state association.

Full disclosure - I'm all of the above.

Answer 10

You were quoted a fair rate, and she's correct in that the interest rate you pay won't vary much from place to place. The reason is that the mortgage broker does not set the rate. The source from which they obtain the funds does that, and they generally quote the same rates to all mortgage brokers in the area.

Answer 11

The interest rate is pretty standard considering what prime is right now...but please beware of the interest only loan...if you pay only the interest every month you will have applied NOTHING to the principal of your mortgage. You risk being upside down in your loan if you do this if your home depriciates in value.

With your great credit you should qualify for a fixed rate mortgage with a good interest rate...