Should You Use The Builder's Lender? NO!
Should you use the Builders In-House or Preferred Lender? The answer to this question is not only no... HELL NO! Okay, let me play nice. 9 times out of 10, using the builders in-house or preferred lender is not going to be in your best interest. I'm going to explain to you why and provide you video proof of why this is not the best deal for you financially.
The Builder Wants You To Use Their In-House Lender
Okay, we're going to assume that you've already gone through the process and you've already selected a builder for your new home and now it's time to talk about the financing. The builder is going to do everything in their power to get you to use their In house or preferred lender. They will say things like it's in your best interest to keep everything under one roof and they're also going to try and throw money at the problem as well. They will offer to pay closing costs etc. I have first-hand dealings with builders and we always beat the In-House lender. The money they say they are giving you is easily taken away like a magician and if you don't know what to look for you won't even see it. Most homebuyers don't have enough knowledge about how mortgage fees actually work to understand the fee manipulation that happens when you use and builder's lender.
They'll tell you things like "Outside Lenders can't close on time" to try and scare you as well. Seriously, It's 2021! We can literally close loans in 2 weeks. Any lender worth their weight can definitely close your loan in under 30 days. This is just a scare tactic to scare you into using their lender as well.
The Builder's Lender Fee Manipulation
The thing that will help you the most is understanding 1 simple concept. Nothing is free! Everything has a cost! In the example here you'll notice the builder told the homebuyer they were getting a "Builders Incentive" of $6860. However, if you glance to the left and take a look at the origination points to buy the rate down to 3% they are charging them a discount fee of .660 or $2,229.27. At the time of this estimate provided by the builder's lender, that rate didn't come with a cost.
In fact at the time of the estimate. A rate of 3% came with a lender credit of $4,100 dollars going back towards the buyers closing costs. That's a total difference of $6,300 dollars that the borrower will pay. Not to mention, they also charged the buyer a processing fee as well as an underwriting fee totaling another $1,525. In this scenario, if the buyer was truly going to buy down the interest rate with the .660 or $2,229 fee above, the rate should have been 2.5%. That would have saved the buyer 90 dollars per month in mortgage payments. A whopping $34,000 over the life of the loan. $90 Dollars a month may not seem like a lot, but when you have that extra $ 90 dollar to apply towards a credit card it adds up pretty quick. You could also take those additional $ 90 dollars and add it to your mortgage and you pay it off 32 months sooner and save yourself another $44,096 in true mortgage payments alone
How is that $6,860 builder incentive looking so far?
Builders In-House Lender Video Explanation
Beat The Builder's In-House Lender And Get The Best Deal In Real Estate
The best way to beat the builders in house lender is to use a Hybrid Agent! A Hybrid Agent is a Real Estate Agent as well as a Mortgage Broker! When a Hybrid Agent does both your Real Estate Transaction as well as your Mortgage Loan, they can provide you a portion of the Real Estate commission to go towards your closing costs.
Why is this important? It's important because we already showed you how a mortgage broker can beat the Builders In House or Preferred lender. The sad reality of it though, if you don't use the lender the builder tries to force you to use, they won't give you those same incentives in most cases. Especially these days when inventory is extremely low and the builders believe they have the only homes on the market.
However, when you use our Hybrid Agent Program, you can still get an incentive from the Real Estate Agent! For the particular scenario in this post, the buyer got a much cheaper interest rate and did not lose out on the incentive because the Hybrid Agent was able to prove a portion of the real estate commission towards the closing costs and it made up for it. The buyer received a Lower Rate, Got Lower Closing Costs, and Still received a rebate towards their closing costs. It's truly The Best Deal In Real Estate!
The real question here is why would you not want to save money on the purchase of your home? Why would you not want a cheaper interest rate? Who doesn't want to bring less money to closing when they purchase a home. I set out to create The Best Deal In Real Estate. It just happens to work out to help those who are dealing with Builders In House Lenders and feel they have no options but to take the higher interest rates. There is definitely a better way to get things done. The Hybrid Agent Program Is The Way! Learn more about the Hybrid Agent Program Below!
Be sure you're getting the Best Mortgage Loan by shopping with a mortgage broker. If you would like a comparison, check out our rates today at LTI Mortgage. As a mortgage broker, we have low overhead and don't have to charge the fees that most mortgage banks out there have to charge. We're a small privately owned company and can pass those savings on to you helping to make sure you save the most money possible. I've worked with some loan officers who set you up with a higher rate to only call you in 8 months to redo your mortgage to make more money. We'll set you correctly the first time and make money from the referrals you send us because we did an awesome job up front!