If you are fortunate enough to have maintained a good credit rating over the years, by paying your bills on time, keeping a good ratio between money you have borrowed and the amount you are allowed to borrow from your credit cards, and never failing to pay back a loan or other purchase, then you have earned the right to negotiate your terms when applying for a mortgage, refinance, or home equity loan. Most people do not have this bargaining chip, so consider yourself lucky.
First, what constitutes good credit? An high credit score is one above 650. However, the higher your number, the better off you are. 700 is an excellent rating, 750 is even better, and anything above 800 is considered virtually perfect. The closer to 800 that your score is, the more you will be able to negotiate with your lenders to obtain more favorable terms, rates, and other deals.
Unfortunately, just applying for a mortgage and having good credit are not enough to get you everything you want. Rates will still vary, so the first step you should take is to go online and request quotes from numerous financing sources. Make sure to get a Good Faith Estimate from each one so that you have an accurate look at all the fees that may be associated with your transaction. Despite your excellent credit, you will probably still find sizable variations among different brokers and agents. Once you find the companies that are offering the best deals, you have a starting point for your negotiations.
Remember, borrowers with 700, 750, and 800+ credit scores are in high demand these days, as mortgage companies and banks have become increasingly conservative about their standards and practices in light of the bad real estate market and the number of foreclosed properties that already exist. Do not forget this when you speak with prospective banks regarding refinancing or home loans – you have something they really, really want right now!
Once you have narrowed down the lenders with whom you wish to negotiate, here are some things your good credit will allow you to request:
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Better interest rates. You can ask to have even lower rates than the ones you were initially offered. While that will reduce the amount of money the bank makes over the course of your loan, they can count on you to pay them back in full, and in a timely manner. It's far better for them to have a customer like yourself, than one who might pay higher rates but quickly default on his or her payments.
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Better terms. If you are signing up for a adjustable rate mortgage, especially, you may be able to convince your lender to give you your desired time frame for your initial, low rate to be locked in, and you may also be able to negotiate how high the rate is allowed to climb when it does adjust.
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Smaller fees. Mortgage agents and brokers want to work with you. Because of your good credit rating, they will sometimes be willing to decrease their closing costs and other fees since they can trust you to be a dependable client throughout the duration of your loan.
Whether you are looking to buy a new primary or secondary residence, refinance the loan on an existing property, or use the equity in your home to borrow additional money for renovations, repairs, or an upcoming expense, your good credit will serve you well.
