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Using the Builder's Lender? Pay attention....

By Kaushik Sirkar

Real Estate Agent with Call Realty, Inc.

April 01, 2007 11:37 AM

Using the Builder's Lender? Pay attention....
by Kaushik Sirkar, Chandler REALTOR®
Chandler AZ Real Estate

People buy new homes all the time. They get mortgages on these homes all the time and typically (often incentive-based) they use the builder's preferred lender. This is commonplace. Its also somewhat different than when purchasing resale homes. When purchasing a resale home, a Realtor® will often recommend a few tried and trusted lenders. In either case, as the agent, I stay very engaged with the mortgage process.

Well here is something scary. A large national builder is being investigated for potential fraud within its mortgage division. What exactly are we talking about with this fraud? We don't know. I'm guessing the details will come out in the near future.

What is the lesson here for home purchasers and their agents? Hard to say until these details come out. But pay attention. Look over all the details. Make sure all data is factual and nothing is being fudged. If its too good to be true, then it probably is....

Thanks for Reading :)

Kaushik Sirkar, Chandler Realtor®
http://www.homesphx.com

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ARDELL DellaLoggia

Better Properties Seattle - Kirkland, WA

Thanks for the warning, but sometimes we feel so forced to use the builder's lender. Like a condo conversion project that other lenders won't fund until after 50 units are closed. I just closed a new construction where the builder's lender was Countrywide, and everything went fine. I'm doing the condo conversion one and we ended up extending closing and switching lenders. Cross your fingers on that one!

Apr 01, 2007 02:49 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Kaushik, I don't do much with builders so I am not sure what they might have done, but hopefully it will serve as a notice to other builders and their preferred lenders to keep every thing clean.

Apr 02, 2007 09:32 AM

Tchaka Owen

Galleria International Realty - Hollywood, FL

Kaushik, this is a very good post! Builders' lenders often do not give a good deal. Either the rates are high or the rate/point combo is not competitive. A lot of builders tie incentives to using their lenders but most people are not aware that you are not required to use a builder's lender to get those incentives they offer.

Ardell, you're talking of something a bit different. That's warrantability and yes, you're often required to use the builders' lender because they've made arrangements ahead of time to bypass the warrantability issue. If you do run into that issue again, look at the following lenders: Chase, HSBC, BofA, Greenpoint.

They have somewhat lax rules about warrantability. I believe even Wells Fargo has some program.....rates are great, but it's better than nothing.

- Tchaka

Apr 02, 2007 06:53 PM

Kaushik Sirkar

Call Realty, Inc. - Chandler, AZ

Ardell - You are absolutely correct. Too often the enticement for using the builders lender is too high. We must, however, as agents perform our due diligence whoever the lender is.

Ben - And hopefully forums like AR will serve to educate the consumer to help prevent fraud from occurring...

George - Absolutely! I mean we're talking a major national builder, not just some joker doing loans out of his trailer....

Tchaka - I would think that in some cases, you would HAVE to use the builder's lender to qualify for the full incentives, no?

Apr 02, 2007 07:32 PM

Kaushik,

I'm attaching an article for you to read. There's one case that talks of a builder tying incentives to using their preferred lender.

http://creditboards.com/forums/index.php?showtopic=217519

Apr 02, 2007 08:27 PM

Steve Dalton

219-465-8352 - Valparaiso, IN

Northwest Indiana Home Builder

I will say, as I have on other posts, that in most cases the builder is merely protecting their client from the host of terrible lenders out there, the sub-prime meltdown merely proves this point.

Builders have to know if the lender can really make the loan, and frankly a lot of lenders can promise the realtor and the client, and then at the end can really mess things up.

Apr 03, 2007 09:24 AM

Maybe that's the case in Valparaiso, but where I've been, many of the builder lenders are not A-list lenders. And builders are more interested in their own preservation, not that of the clients. So, I do not agree with your statement.

Apr 03, 2007 12:58 PM

Tchaka - Great article, thanks!

Steve - I think its really a case by case basis. I won't necessarily claim the builder's lender can't get the job done in a majority of cases...but I do seem to encounter builder's lenders that do charge a little too much....

Apr 03, 2007 06:55 PM

Using the Builder's Lender? Pay attention....

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