Do you carry a good credit score and low debt? Can you afford to make a 20% or higher down payment? Do you have sufficient income to support the loan you want to apply? If yes, you are one of the best borrowers a lender could wish for. So, normally you also have an easier time trying to negotiate the rate of interest offered by the lender or bank.
Today, the above mentioned 3 parameters are ideal for checking most of the borrower's qualification, as per the lenders. If you don't fulfill any of those, you can negotiate the matter during the mortgage process. As much as you fall below those criteria, you'll also face that much difficulties while negotiating rates.
Borrowers with a strong credit score have the opportunity to pick and choose the best offers on mortgage terms, rates and fees. Average-score borrowers don't have such choices. They must take what they're offered, and be thankful for getting the approval. So, it’s obvious that these average borrowers may also face problems if they anyhow get behind their payments.
The Federal Trade Commission explained to the average borrowers how they should act if they’re falling behind monthly payments. A borrower should talk to his lender as soon as possible. There are different options available to get you out of these rough times. You will have these options and don’t need to ask for help.
- Contact your mortgage lender as soon as possible. Lenders are normally interested to work with homeowners who are facing issues while paying monthly mortgage payments. Since the lender or mortgage company somehow going to lose a big amount of money if the borrower decides to foreclose, the lender himself will find a genuine solution to his own advantage.
- Check out if you have paid off 20% of the total loan amount yet or not. Your lender can give you that detail. If you’ve paid it off at least 20%, then you may don’t need to pay the additional amount towards mortgage insurance payment each month. Depending on the total loan amount, this option can save your $100 to $300 every month.
- Inform your bank or mortgage company that you have started shopping for a good homeowners insurance that has low premiums. This is another way to lower your monthly mortgage payment, but homeowners normally don’t consider it often. Even if you escrow your insurance payments, you can switch insurance companies for a better rate on premium. The less money you contribute into the escrow account, the lower your monthly payments will be.
- Communicate with your lender and ask him to lower the rate of interest on your mortgage without considering the refinance option. It’ll eventually reduce your monthly payments. Some lenders are willing to reduce the rate that the borrower can afford for several months. After those months, the lender again evaluates financial situation of the borrower.
- Make arrangements for a temporary suspension of monthly payments. Several lenders will agree to do this if the homeowner’s financial problems are temporary and expected to be short. Sometimes, homeowners can negotiate with a lender to freeze a part of the loan principal, so that they only need to pay interest on the remaining part. Your monthly payments will be low this way for few months, but you are still responsible for paying back the principal in full.
- Use the refinance option but at a cheaper rate. You can also pay the entire loan slowly if you extend the term of the loan a bit long. These two strategies may lower the monthly payment. If you extend the term, you might have to pay extra as interest charges.
- Make enquiries for refinancing option with an interest-only mortgage. This particular option is not applicable to every borrower for it’s significant increase in monthly payments, after the period expires.
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