Can You Negotiate Mortgage Rates? 4 Ways to Lower Your Rate

August 31, 2023 - 12 min read

Yes, you can negotiate mortgage rates

When applying for a home loan, you can indeed — and should — negotiate the mortgage rate.

Mortgage interest rates are not set in stone, and research confirms that those who get multiple quotes often secure lower rates. A surprising number of home buyers and refinancers, however, forego negotiations and settle with the very first lender they encounter.

Instead, change that narrative and use your bargaining power to negotiate the best deal possible. If you don’t, you’re most likely throwing money away.

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How to negotiate mortgage rates

Whether you’re a first-time home buyer looking for a new home or a homeowner who wants to refinance your current mortgage, negotiating the best mortgage rate is possible. However, it’s not as simple as haggling over percentage points.

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To negotiate a better mortgage rate, you’ll have to present yourself as a creditworthy borrower. And you’ll have better luck if you come to the table with a lower quote from a different lender in hand.

Here are four strategies to secure the best mortgage rate before you lock:

  1. Explore with multiple lenders: Cast a wide net and gather quotes from various lenders. The effort is well worth it, as even a slightly lower interest rate can lead to substantial savings over time.
  2. Seek a match from your lender: If you have a preferred lender in mind, don’t hesitate to show them the offers you’ve received from other lenders. A little healthy competition could lead them to match or even beat the competing rates.
  3. Consider discount points: You have the option to buy discount points, which can lead to a lower mortgage rate over the life of the loan.
  4. Strengthen your mortgage application: Boost your credit score, save for a significant down payment, and pay off debts. A stronger financial profile can earn you a seat at the negotiation table.

We cover each rate-negotiation strategy in more detail below.

But the rule of thumb is this: If you have strong personal finances and are willing to get quotes from different lenders, you can usually find a lower rate for your mortgage.

Whether you’re a first-time homebuyer or a seasoned homeowner, negotiation is your secret weapon.

Get rate quotes from multiple lenders

While it may take some time, shopping around for a low mortgage rate is well worth the effort. Even a slightly lower interest rate can save you money on both your monthly mortgage payments and throughout the life of your loan.

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As an example:

  • The monthly payments on a 30-year fixed-rate mortgage for $250,000 at 6.75% is $1,549
  • That same loan, with a 6.50% interest rate, has monthly payments of only $1,516
  • While a monthly savings of $33 may not sound like much, you’ll save $11,880 over the life of a 30-year loan

To see similar savings, request rate quotes from multiple lenders. Each lender will provide you with an estimate that will help you compare mortgage interest rates, closing costs, lender fees, and other borrowing expenses like home appraisal fees, credit report fees, and title insurance.

Remember: providers with the lowest upfront mortgage rates might not actually be the “cheapest” once points, fees, and closing costs are tallied up.

Lenders maintain a certain degree of flexibility with the rates they offer. So if you prefer one lender—maybe because you know the loan officer personally, or they have a branch nearby—don’t be afraid to approach them with a lower estimate and kindly request that they match it.

In some cases, the company you want to work with will be able to lower your rate to compete with other loan estimates. Other times they won’t, but it never hurts to ask.

Make your lender compete for your business

When you negotiate your mortgage rate with lenders, you can often benefit from significant savings over the life of the loan. In such a case, it’s critical to take advantage of the market’s competitiveness. When you receive a lower interest rate offer from one lender, use it to persuade another lender to match or even undercut that rate.

Begin by requesting an official Loan Estimate or pre-approval document from the lender offering the lower interest rate. This document serves as verifiable evidence of the competing offer, making it an invaluable asset in your negotiation arsenal. Remember that valid documents are often more responsive to lenders than verbal claims.

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Openly and professionally communicate the lower offer to your preferred lender, expressing your interest in working with them while emphasizing the financial implications of the lower rate. Do not be afraid to mention that a matched or better rate may sway your decision.

For example, you could say, “I appreciate the service you provide and am eager to finalize my home loan with you. However, I received a loan estimate from another lender at 6.75%, as opposed to the 7% that you’ve offered. If you could match or beat this interest rate, it would have a significant impact on my decision to work with you.”

Most lenders place a high value on customer acquisition and retention, making them open to rate negotiations. However, if the lender does not match the offer, it’s wise to be prepared to explore other lending options.

Lower your mortgage rate with discount points

You also have the option to buy discount points with most mortgage lenders. Discount points let you pay a little more upfront for a lower mortgage rate over the life of the loan. Typically, one discount point costs 1% of the total loan amount and lowers your rate by about 0.25 percent.

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Mortgage discount points example:

 With NO discount pointsWith ONE discount point
Loan amount$400,000$400,000
Cost to purchase discount point$0$4,000
Mortgage rate6.75%6.50%
Interest paid over 30 years*$533,981$510,178

*Loan assumptions: $400,000 home purchased in the state of Florida with 20% down. Rates and interest payments shown are for sample purposes only. Your own rate and payments will vary.

In this scenario, purchasing one point costs $4,000 at the closing table. But it would save the homeowner roughly $23,803 over the life of their loan.

Strengthen your mortgage application

This strategy might not be as helpful if you’re close to closing on a mortgage loan. But if you have a little more time before you lock in your rate, consider that a stronger application gives you some leverage to negotiate your mortgage rate.

Verify your new rate. Start here

Here’s the secret: the stronger your financial situation, the more appealing you become to lenders. And they are more willing to negotiate to win over your business. That could mean trying for:

  • Higher credit score: Take steps to raise your score before you apply. Stronger credit scores typically result in lower mortgage rates
  • Bigger down payment: A more significant down payment often leads to a lower mortgage rate. You’ll save even more if you can put 20% down and avoid private mortgage insurance (PMI)
  • Lower monthly debts: Paying off some debt from credit cards or other loans before applying leads to a lower debt-to-income ratio (DTI) and often a lower mortgage rate

Patience is key, though. The road to a higher credit score, accumulating a substantial down payment, or clearing debts requires time. But if you can wait a little while—or if your rates look worse than you thought and you want to make a change before trying again—these are good ways to score a significantly lower mortgage rate.

Tip: Use a mortgage calculator and pull your credit history

By using a mortgage calculator, you gain insight into how your down payment, credit score, and interest rate work together to shape your mortgage payment.

Additionally, if you haven’t checked your credit history, consider this your friendly nudge. You can request free copies of your credit reports from the three major credit bureaus—TransUnion, Equifax, and Experian—giving you a broader view of your financial profile.

Negotiating your mortgage fees and closing costs

Your interest rate is a big part of how much your loan will cost, yet it’s not the only factor to consider when securing a mortgage. There are other costs and fees that accompany it. You should plan to compare and negotiate these fees when you talk to lenders and third-party service providers.

Some are negotiable, while others are typically fixed. Let’s take a closer look at each category.

Negotiable fees

While this is not an exhaustive list of mortgage fees, these are among the most commonly negotiated costs found on your Loan Estimate.

  • Loan Origination Fee: Charged by lenders for processing new loan applications, this is usually one of the most substantial fees. It’s negotiable and varies from lender to lender
  • Application Fee: In certain cases, lenders impose a fee for submitting a mortgage application. However, it’s worth noting that this fee can sometimes be waived or reduced
  • Points: These refer to prepaid interest on the loan, paid upfront to decrease the interest rate. The number of points you choose to purchase can be negotiated
  • Title Services: This covers the cost of title searches, title insurance, and attorney fees. You can often negotiate these costs and shop around for the best deal
  • Home Inspection and Appraisal Fees: When it comes to these services, you’re not bound to a single provider. You have the flexibility to explore options, potentially negotiating a lower price

Non-negotiable fees

While it’s generally not possible to negotiate the cost of these fees with a single lender, you have the option to compare and contrast them across different lenders. Here’s a closer look at some of these fees:

  • Recording Fees: These charges cover the legal recording of your new mortgage and title. They are unnegotiable and set by the city or county
  • Property Taxes: These are also set by your local government based on the assessed value of the property. Unfortunately, they are fixed and cannot be negotiated.
  • Prepaid Daily Interest Charges: If your closing falls within the middle of a month, your lender will collect interest from the closing date until the end of the month. This charge is calculated based on your interest rate and the loan balance, making it non-negotiable
  • Credit report fees: These fees cover the cost of pulling your credit score and history
  • Escrow Fees: These are fees for the service of holding your deposit until the transaction is completed. You can sometimes negotiate these fees or choose a different escrow service.

Remember that every loan and every lender are different, so what can be negotiated in one situation might not be in another. Ask questions, try to get clear answers, and try to negotiate whenever you can. Your diligence can make a difference in the overall terms of your mortgage.

Tips to negotiate mortgage rates and fees more effectively

It can seem daunting to negotiate a mortgage rate and fees, but it’s a process that can be navigated strategically. Below are key steps to getting the best possible deal on your mortgage.

Understand your local real estate market

Before negotiations, ensure you understand the current state of the mortgage market in your area. You can do this by regularly reviewing major mortgage lenders’ websites or financial news outlets.

For instance, you might consult the Freddie Mac Primary Mortgage Market Survey for benchmark rates. Online mortgage calculators are also invaluable tools. Equipping yourself with knowledge about prevailing rates gives you the knowledge to recognize a good offer when you see one.

Improve your credit score

Lenders are more inclined to negotiate with borrowers they consider lower-risk. A high credit score can thus significantly bolster your bargaining position.

Compare rates with multiple lenders. Start here

Strategies for improving your credit score include paying down your debts, avoiding late payments, and refraining from opening new credit lines in the months leading up to negotiations.

A high credit score, especially 750 or above, can potentially secure a more competitive rate than a score below 600.

Be transparent

Effective communication with potential lenders is key. Be clear about your needs, your financial situation, and what you’re looking for in a mortgage. Providing accurate documentation and expressing that you’re serious about securing a good deal can put you in a more favorable position.

As an example, providing proof of a stable income and a strong saving history can enhance your credibility and appeal with lenders.

Shop around

This was also a tip for negotiation, but it’s worth repeating. Comparing rates from different lenders can help you find the best mortgage rate without the need for negotiation.

Consider this scenario: one lender might offer a 7.5% rate, while another may offer 7.2%. Shopping around can help you find these variances and make an informed decision.

Consider a mortgage broker

A mortgage broker can act as an intermediary between you and potential lenders. Their established relationships and negotiation skills can be advantageous.

A broker often knows which lenders are more receptive to negotiation or offer deals that align with your circumstances.

Why you have to shop to negotiate mortgage rates

Mortgages are a lot more regulated than they used to be. Consequently, individual loan officers have less wiggle room to change rates from customer to customer. That’s why we explore tactics such as comparing Loan Estimates and purchasing discount points to lower your rate, rather than trying to bargain with your loan officer.

Compare rates from multiple lenders. Start here

In today’s real estate market, some lenders are more efficient than others. They lower operating costs by using online applications and digital processing, and those overhead savings often get passed on to customers. Conversely, other providers handle significant loan volumes, affording them the ability to offer reduced lender fees and rates while still maintaining profitability.

Moreover, almost every lender also has some sort of niche with different types of mortgages. Some cater to low-income or low-credit borrowers, while others are more geared for self-employed people or offer specialized loans like jumbo or FHA.

So shopping around doesn’t just give you leverage to negotiate a lower mortgage rate. It also helps you pinpoint mortgage lenders that specialize in the type of loan you need. By connecting with a lender that specializes in your specific type of mortgage, you increase the chances of obtaining a competitive rate.

Negotiating mortgage rates FAQ

Can you negotiate mortgage rates? 

Yes, mortgage rates are often negotiable. Borrowers can shop around, compare rates from different lenders, and use these as bargaining tools to negotiate for a lower rate from their preferred lender.

Can banks offer better mortgage rates? 

Yes, banks can offer better mortgage rates. Different financial institutions have varying lending practices and risk assessments, which can influence the rates they offer. Some banks and credit unions may also offer special rates to their existing customers, making it worthwhile to explore options with your current bank.

Can you negotiate a mortgage rate after locking in? 

Generally, once you’ve locked in a mortgage rate, the terms are fixed and cannot be negotiated further. However, some lenders offer a float down option, which allows you to take advantage of a lower rate if market conditions change during the rate lock-in period. The specifics depend on the terms of the lock agreement with your lender.

Can I negotiate my mortgage offer? 

Yes, you can negotiate your mortgage offer. This includes not only the interest rate but also fees and other loan terms. It’s important to fully understand your offer and feel confident in negotiating terms that will make your mortgage more affordable and beneficial for you.

Can you negotiate mortgage refinance rates? 

Absolutely. You can negotiate mortgage refinancing rates. Much like an initial mortgage, lenders are often willing to negotiate to secure your business. You can get quotes from multiple lenders before your mortgage term is up to negotiate the most favorable refinance rate.

What are today’s best mortgage rates?

Even when mortgage rates are on the rise, some lenders offer better deals than others. It’s always good to shop around to find the lowest rate possible. We recommend comparing rates from at least three to four lenders to find the lowest offer.

Time to make a move? Let us find the right mortgage for you

Gina Freeman
Authored By: Gina Freeman
The Mortgage Reports contributor
With more than 10 years in the mortgage industry, and another 10 years writing about it, Gina Freeman brings a wealth of knowledge to The Mortgage Reports as its Associate Editor. Gina works with a team of world-class real estate and finance writers to bring timely and helpful news and advice to the audience. Her specialty is helping consumers understand complex and intimidating topics.
Aleksandra Kadzielawski
Updated By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree in finance from DePaul University. She is also a licensed real estate agent in Arizona and a member of the National Association of Realtors (NAR).