The housing market may have shown signs of life in recent months, but there is no doubt that state of real estate still remains stagnant and dismal when compared to the pre-recession years. Foreclosure signs dot urban neighborhood, exurban housing tracts sit vacant and half-finished, and home values continue to fall even as tax rates increase.
For someone who has never before owned a home, it may seem like a perfect time to jump into the market. Low prices and high levels of inventory usually translate into a buyer’s paradise, after all. But many first time home buyers are discouraged from pushing the issue any further when faced with an inhospitable lending environment. Banks, once willing to write a check for any home purchase, are now being far more careful in their lending habits. When they do lend to a first-time buyer, they often do so at a higher and more burdensome mortgage rate.
The first time home buyer, consequently, may need to try negotiating a mortgage for a lower rate if he wants to get a viable offer. If you find yourself in this situation, here are a few suggestions for boosting your chance of success at the negotiation table:
Do your research
Whether you’re a first time or fifth time home buyer, the mortgage rate you receive should, at least in part, reflect rates being offered in your demographic and surrounding community. Having a knowledge of these numbers can help tremendously in the negotiation process. Use sites like Zillow and Bankrate.com to start getting an idea of where your mortgage rate should fall. You may also want to get quotes from other lenders.
Try to get an FHA backed mortgage
Mortgages with FHA backing are specifically targeted towards first-time buyers and those with lower credit scores. While this may sound like a recipe for higher rates, mortgage rates on FHA loans have in fact fallen considerably in recent months. Getting FHA backing can consequently help you take a different angle at the negotiation table.
Stress your credentials
While previous home ownership is one criterion that lenders examine, they also care to see a consistent employment history, a decent down payment, and a high credit score when assessing someone for a mortgage. Even if you have never owned a house before, then, you can still tout your credentials in these other areas.
These are a few of the ways that you can better negotiate for a favorable mortgage rate. While getting a good rate can be difficult these days, especially for the first time home buyer, it is certainly doable so long as you put in the effort.