Mortgage interest rates are high, but this one important step can save you money.

Mortgage rates fell to record lows in 2020, giving buyers a great opportunity to save long-term on their mortgage costs. Since mortgage interest rates are much higher these days, buyers are more likely to struggle financially if home prices also rise.

According to Freddie Mac, the average interest rate on a 30-year mortgage was 6.95% as of mid-December. And those interest rates are likely to result in significantly higher mortgage payments.

If you’re looking to buy a home, there may not be much you can do to save money in the process. Of course, you can also try offering a lower price to the seller. However, given the current low housing inventory, sellers tend to have their fair share of buyers. And you may not be willing to accept less than the asking price.

Additionally, coming in with a high credit score may result in a lower mortgage interest rate, but you can’t get a 30-year loan at 5.5% when the average interest rate is closer to 7%. You may get a lower mortgage rate by applying for a 15-year loan instead of a 30-year loan, but you may not be able to afford the higher payments that come with it.

That said, there is one step you can take to save money when buying a home. You have to proceed strategically.

Negotiating closing costs with your mortgage lender

When you sign a mortgage, you typically have to pay closing costs as part of the deal. Closing costs typically range from 2% to 5% of the loan amount. And mortgage lenders typically give you the option of paying those fees up front when you close on your home, or rolling those fees into your mortgage and repaying them over time.

However, just as it is possible to negotiate with a car dealer when purchasing a vehicle or with a contractor when renovating a kitchen, it is possible to negotiate with your mortgage lender about closing costs. You need to know what fees your lender will allow.

Fees that are generally non-negotiable

Some of the fees your lender charges you at closing may not be fees administered by the lender. For example, recording fees are typically set at the municipal level. So, if it costs $45 to register a mortgage with public records where you live, that’s $45 in fees the lender must pass on to you. Because this is simply the current interest rate.

Likewise, you will typically end up having to pay property taxes when you close on your mortgage. Property taxes are often paid quarterly or annually, so you’ll need to cover your share of the bill (or partial bill) for the year. However, like recording fees, property taxes are not set by your mortgage lender, so the amount allocated to your property is the amount you are willing to pay.

Negotiable Fees

However, some of the fees associated with mortgage closing may be negotiable. Many lenders charge an application fee as part of the mortgage process. This is a fee that the lender may lower or waive.

Likewise, when you apply for a mortgage, you must go through underwriting, which is a process of researching your financial information. Lenders sometimes charge a separate fee for underwriting, but this amount can be reduced.

Lastly, you should get an appraisal on the home you want to buy before closing on your mortgage. If your lender sets this up, you can expect to pay an appraisal fee. However, your lender may be willing to allow you to obtain the appraisal yourself. If so, you may want to research the costs and try to find a cheaper alternative to your lender’s default option.

Buying a house is quite expensive these days. However, if you can negotiate with your lender to lower your closing costs, you may be able to save some money to get some much-needed breathing room.