When shopping for mortgage, know how to bargain

Avoid two main games lenders play to boost profits

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A consumer negotiating the terms of a mortgage with a lender or mortgage broker (henceforth "loan provider") is in what economists term a "bilateral bargaining process." Only two parties are involved, and the terms arrived at depend in part on their respective bargaining power. Bargaining power is the power to influence the terms of the transaction by threatening not to do it. The bargaining power of borrowers is inseparable from the knowledge that they have it and their willingness to use it. Borrowers entering transactions with the mindset of petitioners seeking favors are not aware of having bargaining power, and as a result do not have any. They have potential bargaining power, which does them no good. The potential bargaining power of borrowers is greatest on a refinance, because typically they have no time limit on when the money is needed. This usually means that they can break off negotiations with one loan provider and begin with another without...