Mortgage rates in Florida are negotiable, and we understand that we can use certain things to maximize a lender’s wiggle room to lower the interest. A high credit score is the linchpin of your negotiation. To further reduce the risk your lender will have to absorb, borrow less and shorten the term.
However, a mortgage company in Fort Myers, Orlando, or Miami doesn’t make an offer based on the usual criteria alone. If you have specific requests to modify the agreement in accordance with your situation, be prepared to make concessions and to accept slightly higher interest.
Below are some of the things that borrowers do that compel lenders to drive the mortgage rate higher.
1. Living Elsewhere
Lenders generally feel more secure to provide financing for owner-occupied properties. If what you buying won’t be your primary residence, don’t expect to receive the lowest offer.
Second houses and investment pieces of real estate are riskier collateral in the eyes of lenders, conservative and bold alike.
2. Buying a Condo
A condominium unit is a far riskier security for a mortgage than a detached single-family house. In the event of a market crisis, condo values tend to drop more significantly than those of freestanding properties.
The land-to-building ratio offers a good explanation for this phenomenon. In real estate, what appreciates is the land, not the structure built on it. In a condominium complex, you’re buying a unit on land jointly owned by many other building occupants.
Even if your condo costs almost the same as a single-family house, your unit includes little land, so there’s less value.
In the event of a foreclosure, a lender will have limited options to re-sell it a better price. It can’t be re-zoned nor be remodeled dramatically.
3. Needing More Time to Close
Locking a mortgage rate protects you from market forces when you feel that the interest is already at its lowest, but a lender won’t agree to lock the rate forever. If you need a longer lock period, you’ll pay for the privilege through higher interest.
You can float your mortgage rate, and wait for a couple of months to see if it can still go down without assurances. Doing so, however, is a risk in itself. If things don’t go your way, you may pay for more interest before you didn’t lock a lower rate months ago.
4. Evading Private Mortgage Insurance
The PMI premium is a charge to your monthly mortgage bill if you can’t pay a 20% down payment. This insurance isn’t meant to protect you, but rather your lender in case you default on your loan.
According to Zillow, a monthly PMI rate costs anywhere between $30 and $70 for every $100,000 borrowed. In other words, it can increase your mortgage payment by up to $210 a month, which can be burdensome.
Fortunately, you may find a lender who’s willing to eliminate this monthly charge for good without requiring you a 20% money down. Some lenders agree to waive the PMI in exchange for a higher interest rate. Do the math and assess your long-term plans to see whether this strategy is for you.
Negotiating for a lower mortgage rate can be challenging, but it pays to have reasonable demands and realistic expectations to get a fair deal.