How do you negotiate the best interest rate and closing costs for your pre-approval?

1 Compare lenders

Don't settle for the first lender you find. Shop around and compare different offers from banks, credit unions, online lenders, and brokers. Look at the annual percentage rate (APR), which includes the interest rate and other fees. Also, check the closing costs, which are the charges you pay at the end of the loan process. Ask for a loan estimate from each lender, which breaks down the terms and costs of the loan.

2 Improve your credit score

Your credit score is one of the main factors that lenders use to determine your interest rate and loan eligibility. The higher your score, the lower your rate and the more options you have. To improve your credit score, pay your bills on time, reduce your debt, and avoid applying for new credit. Check your credit report for errors and dispute them if you find any. Aim for a score of at least 620, which is the minimum for most conventional loans.

3 Negotiate with lenders

Once you have a few offers, you can try to negotiate with lenders to get a better deal. You can use the loan estimates as leverage and ask them to match or beat the lowest APR or closing costs. You can also ask them to waive or reduce certain fees, such as the origination fee, the appraisal fee, or the application fee. Be polite and respectful, but also assertive and confident. Explain why you deserve a lower rate or cost, and show them that you're a low-risk borrower.

4 Lock in your rate

When you find a lender that offers you the best interest rate and closing costs for your pre-approval, you can lock in your rate. This means that the lender guarantees that rate for a certain period of time, usually 30 to 60 days. This protects you from any market fluctuations that might increase your rate before you close on your home. However, locking in your rate might also prevent you from taking advantage of any rate drops. You can ask your lender if they offer a float-down option, which allows you to lower your rate if it drops before closing.

5 Review your documents

Before you sign anything, make sure you review your documents carefully and understand what you're agreeing to. Look for any discrepancies between the loan estimate and the closing disclosure, which is the final statement of your loan terms and costs. If you find any errors or changes, contact your lender and ask for an explanation or correction. Don't be afraid to ask questions or seek professional advice if you're unsure about anything.

6 Celebrate your pre-approval

Congratulations, you've negotiated the best interest rate and closing costs for your pre-approval! You've taken a big step toward buying your dream home. Now you can focus on finding the right property, making an offer, and closing the deal. Remember to keep your pre-approval letter handy and update your lender if anything changes in your financial situation or personal information.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?