Can You Negotiate Mortgage Rates With Your Lender?
The answer is yes — you can negotiate better mortgage rates and other fees with banks and mortgage lenders, if you’re willing to haggle and know what fees to focus on. Many homebuyers start their house hunt focused on negotiating their home price, but don’t spend as much time on their mortgage negotiation strategy. Understanding how to negotiate mortgage rates may leave you with more money in your pocket, instead of the lender’s.
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How to negotiate mortgage rates
It’s easy to jump right into the shopping stage of the homebuying process once you’re preapproved for a mortgage. However, buyers who pause to consider how to negotiate mortgage rates often save money over the life of the loan. That’s because the interest rate on a home loan is a major factor in your monthly payment and total closing costs.
Here’s how to get the best mortgage rate with your lender:
1. Know where you stand with your credit scores
The first step is to have a firm grasp of your credit history and financial situation — it’s tough to negotiate for the best mortgage rates if you don’t know what your credit score and payment history looks like. The better your credit, the stronger position you’ll be in to negotiate mortgage rates.
Things you should know
2. Know what mortgage terms you want and need
Familiarize yourself with the loan options available to you. When you’re ready to negotiate mortgage rates, make sure the loan terms fit within your budget and long-term financial plans. For example, adjustable-rate mortgage (ARM) rates are typically lower than fixed interest rates initially, but could be less affordable later when they change later.
An important part of your mortgage negotiation strategy is knowing what type of loan and terms you’re looking for, and how your choice affects the cost of the loan. A mortgage calculator can help you estimate your monthly payment and loan costs.
3. Get quotes from multiple lenders
Once you have an idea of the type of mortgage you want, you can start loan shopping. Get quotes from at least three different lenders — you can do this by working with a mortgage broker who’ll get you quotes from multiple lenders, or you can go directly to banks and mortgage companies.
You should also negotiate mortgage rates offered by a variety of different types of lenders. For example, you may want to apply with at least one credit union, one national bank and one online lender.
Keep track of your loan estimates, so you can compare them and position yourself to negotiate. One important tip: Collect all your estimates on the same day to make apples-to-apples comparisons. Like stocks, rates change every day.
4. Compare total loan costs
In addition to the interest rate, compare each lender’s fees, including origination and application fees. Mortgage lenders may be willing to match rates and lower some of their charges to compete for your business. Fees often differ between lenders, which makes it confusing to figure out how to negotiate mortgage rates between multiple banks.
A helpful way to compare the terms and fees between several lenders is to look at the annual percentage rate (APR) on each loan estimate. The APR reflects the total loan cost — including fees spread out over the life of the loan — and is typically higher than the interest rate. The higher the APR, the higher the closing costs. This figure is a straightforward way to compare several loan offers at a glance.
5. Negotiate with your lender
Once you have multiple quotes, start narrowing down your choices. You may decide you like one lender over another based on its service, the experience of the loan officer or the ease of doing everything digitally.
If the bank you prefer doesn’t have the lowest rate, you can negotiate the mortgage rate down by showing them a copy of a competitor’s offer and asking them to do better on the rate, or at least match it. Some lenders may be willing to lower their rate to gain your business — or keep it, if you’re refinancing with your current lender.
6. Consider locking in your interest rate
The only way to protect your best quote is to request a mortgage rate lock. You’ll reduce the chance the rate might increase before you close. Work with your loan officer to determine how long you should lock in your rate, and make sure you don’t have to pay any upfront rate lock fees.
What to know about negotiating mortgage fees
While your interest rate is a major factor in the cost of your loan, you’ll also need to pay additional borrowing costs and fees related to getting a mortgage. During your negotiations with lenders and third-party service providers, you should plan on comparing and negotiating mortgage fees.
Standard mortgage fees and their typical costs
| Fee type | How much? |
|---|---|
| Application fee |
|
| Loan origination fee |
|
| Discount points |
|
| Pest inspection fee |
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| Survey fee |
|
| Title services Title insurance |
|
How to haggle these fees
You’ll see these fees on Page 2 of your loan estimate in sections A and C.
Application fee. This is an upfront fee to apply for a mortgage, but many lenders don’t charge one. It may be used to prepay for your credit report and appraisal fee, but make sure you know that upfront.
Loan origination fee. This fee covers the cost of processing your paperwork, underwriting the loan and pays your loan officer’s commission.
Discount points. Known more commonly as mortgage points, these fees allow you to “buy down” your mortgage interest rate. A discount point usually equals 1% of your loan amount, which typically buys down your rate by up to 0.25 percentage points.
Pest inspection. Depending on where you live, a pest inspection report (such as a termite report) may be required. You can negotiate by checking the cost with several pest inspection companies.
Title services. These may include escrow fees and title insurance costs, which are required to transfer ownership and protect you against claims from prior owners. The fees vary based on your sales price and loan amount. Lenders may have “preferred” title companies they recommend, but ultimately you have control over what title company to use. One tip: Sellers often prefer to use their own title company on a purchase loan, so you won’t be able to negotiate title service fees if your contract allows the seller to choose.
Rare fees you can negotiate
Property survey. Unless there’s a dispute over the boundaries of your property, you have to negotiate a survey fee. If you do, the average cost is between $376 to $745, according to HomeAdvisor.
Rate lock extension. If your loan doesn’t close due to delays related to the lending process, you can negotiate the lock extension fee. However, if you’re dragging your feet on providing documentation for the loan, your lender has the right to charge you for the entire extension cost.
Fees that can’t be negotiated
Section B on Page 2 of your loan estimate shows “Services You Cannot Shop For.” Though you won’t be able to negotiate the cost of these fees with a particular lender, you can compare them between lenders.
- Appraisal fee: The cost associated with determining the home’s value.
- Credit report fee: The cost to pull your credit history and scores.
- Flood determination fee: The cost to determine whether the property is in a flood-prone area.
- Flood monitoring fee: The cost to monitor the property’s location for changes to flood zone designations.
- Tax monitoring fee: The cost to monitor that the property taxes are paid on an ongoing basis.
- Tax status research fee: The cost to determine the homeowner’s property tax payment status.
- Mortgage insurance premiums: Loans backed by government agencies like the FHA, VA or USDA require different types of mortgage insurance or guarantee fees to cover lenders in case of losses. The insurance rates are set by the government, so you can’t haggle them. Conventional PMI is required with less than a 20% down payment, and the PMI company is chosen by your lender.
6 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. If you’re considering a conventional mortgage, watch for the 
sign below to learn about factors that may impact your rate and costs in 2023. Here’s how to get a lower interest rate on a mortgage.
1. Strike while your credit score is at its highest, and your debt is at its lowest.
This is especially true for conventional loans after May 1, 2023: Fannie Mae and Freddie Mac will require a 780 score to get the best rate. That’s 40 points higher than the previous low-rate threshold of 740. You’ll also need to pay close attention to your debt-to-income (DTI) ratio. Lenders divide your total debt by your pre-tax income, and if the ratio is higher than 40%, you may pay a higher rate or more in closing costs after Aug. 1, 2023.2. Make apples-to-apples comparisons. Let the lender know if you’re buying a manufactured home, condo or two- to four-unit home — there may be extra costs associated with these property types. And remember, always collect your rate quotes on the same day.
3. Give yourself a deadline for completing your negotiations. Rates fluctuate, so have a time frame to compare and negotiate better mortgage rates. If you drag out the process, you risk the rates changing, making it more challenging to negotiate mortgage rates among multiple lenders.
4. Be mindful of changes to other loan terms. Be sure you understand all of the terms of the mortgage. Watch the APRs of lenders who agree to negotiate mortgage rates that appear very low; they may be increasing their mortgage fees to offer those lower rates.
5. Leverage customer loyalty. If you already have a relationship with a particular lender, one of the best home loan negotiation tips might be to use your existing customer status. Your lender may be willing to negotiate mortgage fees with you to keep your business.
6. Get everything in writing. Make sure you review the terms on each lender’s loan estimate. This will position you to negotiate better mortgage rates with one lender over another.