When purchasing a product, whether it is a home or something less expensive, buyers can frequently negotiate with the seller in order to reduce the price and get a more advantageous deal.
In the mortgage process, buyers can also negotiate with their lenders to acquire better loan terms, a more convenient closing date, or other benefits. Thus, negotiation can be incredibly valuable when acquiring a mortgage loan for a home purchase and knowledge is the key to being able to do this effectively.
Accordingly, here are 6 facets of the mortgage process which borrowers can positively influence through skillful negotiation:
Depending on the local practices of the area, closing costs may be paid for by either the buyer, seller or a combination of the two. While not every loan program allows borrowers to negotiate these fees, closing costs can add significant up-front expense when securing a mortgage loan.
Potential homebuyers should discuss this issue with their agent or the seller in negotiation; with many sellers today making concessions to expedite the home sales process, borrowers should be able to avoid some of these fees, at the very least using this leverage to come to a compromise.
As a buyer negotiating closing costs in the mortgage approval process, lenders will consider funding a loan based on a variety of borrower criteria, including credit history, level of debt, and employment history, in order to determine the borrower’s appropriate interest rates.
In addition to these factors, borrowers may secure a low mortgage rate by paying points; under some circumstances, buyers can negotiate and allocate these point fees to the seller, reducing their cost of the loan. Furthermore, even when a seller pays these points, the borrower can still deduct them when filing taxes.
One discount point equals one percent of the total mortgage amount and translates into an interest rate deduction typically equal to an eighth of a percentage point. This amount can vary from day to day and can be more beneficial at some times as opposed to others.
When finalizing the mortgage loan, remember to negotiate as a buyer with the seller to choose the closing date, allowing for the selection of the most convenient date to fit your unique circumstances. For instance, if you would like to move in soon, simply ask your seller if this is possible. In the current housing market, many sellers willing to provide valuable concessions, such as allowing buyers to store their belongings in the home or paying for a storage unit in the event that the sale does not move quickly enough.
Conversely, some sellers may be willing to postpone the home sale and rent the home until you can purchase the home. In this type of scenario, the seller can utilize the rent money to pay for the mortgage.
Sellers may provide allowances to buyers in order to compensate for any damaged or outdated features of the home, including dated carpet, chipped paint, or other undesirable qualities. These allowances can be worth several thousand dollars to a savvy home negotiator. In some instances, sellers may be willing to perform these repairs before the sale, rather than making allowances.
Excepting situations in which a property is specifically marketed “as is,” sellers must complete certain repairs to ensure that the home is legally habitable before selling their property. Even in an “as is” sale, the seller may concede to make particular repairs or offer allowances. Remember, if you do not attempt to negotiate, the seller will not likely offer these benefits. These repairs are often required for financing by the appraiser so make sure that you include this possibility in your initial offer on the property.
While sellers typically will not invest additional funds into a home which they plan to sell, buyers can occasionally negotiate with the seller to perform specific repairs or remodeling projects to further the sale. Although unorthodox, home buyers should negotiate with their sellers to determine whether this option is available.
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