Buying a Brand New Home - Do You Use their Preferred Lender?

By
Real Estate Broker/Owner with House to Home, Inc. - Denver Real Estate - 720-231-6373 DRE# ER40011786

 

Typically builders have a preferred lender, and if a Buyer uses this lender, you will have some of your closing costs paid.    The most recent contract with a builder was giving $7500 towards closing costs.

 

Be sure to ask what their current interest rate is, and approximately what their fees will be.  Also, call another lender (maybe the REALTOR's suggestion) and get another estimate to know whether you want to go with the Builder's lender or not.

 

I went over the LE (Loan Estimate) with my Buyers, and they sure add a bunch of what we (REALTORS) call junk fees.   Most of my lenders do not charge an origination fee or processing fees.

 

Buying a brand new home from a Builder, you will be paying fees you normally would not pay if buying a resale home.  

 

In the end, my Buyers did stay with the Builder's lender, the rate was lower and so was the overall costs.

 

Comments (42)

Nick Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtor, Philly Main Line

The other encouragement is to use the builders title company as well. Do you really trust they will insure you if an error arises, as rates are set by the state in PA, why not use your own title company.

Sep 13, 2020 12:38 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Hi Joan:

Excellent point. These offerings from the preferred lender always sound good, especially with the closing cost credit, but the reality may be that they cost you more money in the long run. Buyers definitely need to do their due diligence before making a decision to use the builder's preferred lender.

Jeff

Sep 13, 2020 01:27 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Glad to see Patricia Kennedy featured your post in her series Last Weeks Favorites. Excellent advice..always good to compare fees to make sure you are doing your due dilgence in utizing the service of the builder's lender. I've found it's hard to beat the credit the builder is giving the buyer to use their lender. However it's always wise to double check.

Sep 13, 2020 04:25 PM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Your instincts are good here. Keep up the good posts. Love and light and all the best!

Sep 13, 2020 10:44 PM
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, eXp Realty - Kalispell, MT
Helping your Montana dreams take root

Buyers should always do due diligence, to make sure the loan they are getting is the best long-term solution. 

Sep 14, 2020 05:25 AM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Nick, In CO on a resale if the buyer asks for THEIR title company, buyer will pay for sellers' title insurance.

Sep 14, 2020 12:52 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Jeff, luckily these buyers did, and the credit for closing costs was worth it.

Sep 14, 2020 12:53 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Dorie, most often here it is worth it also, but due diligence is always good!

Sep 14, 2020 12:53 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Thanks Laura.

Sep 14, 2020 12:53 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Kat, I agree, and luckily, they did.

Sep 14, 2020 12:54 PM
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

As a buyer, you should most certainly entertain the builder's lender for all the reasons you list, Joan Cox ... but as you also point out, a buyer should take the time and make the effort to also get a comparison quote.  I can't emphasize just how wise of an action that is.  That way they know for a fact that when they make a final decision that they are getting the right mortgage and best rate available for them.  

Gene

Sep 15, 2020 02:23 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Thanks Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi I try and give my clients the best advice for THEM, and usually doing their due diligence is always a wise decision.

Sep 15, 2020 03:32 PM
Rose King
David Tracy Real Estate - Friendswood, TX
Friendswood / Pearland / Houston Bay Area

Hello Joan. I just had this conversation with a buyer earlier today. The builder will pay $2,000 toward the buyer's closing cost if he uses their lender. But he compared fees, and actually comes out ahead if he uses the lender I recommended. It doesn't always work this way, but it pays to check all options!

Sep 15, 2020 05:36 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Rose King if that would have been the case with this buyer, they too would have gone with my preferred lender.  My buyers got $7500, and other lenders could not compete.  THX for sharing your story too!

Sep 15, 2020 05:45 PM
Bill Winward
CPA Advantage Realty, LLC - Mesa, AZ
Education & Training / San Tan Valley, AZ.

A few years back, I bought the first new build in a subdivision and the builder offered me a very lucrative package to use his lender. I shopped my normal lenders and the builder's mortgage incentives were hard to turn down. I wanted to go with Chase Bank because I did all of my banking with Chase. Well.... we closed escrow and I was quite pleased with the perks I received. Imagine my surprise when a week later, they sold my loan to..... Chase!

Sep 15, 2020 09:37 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Bill, that is true, brokers sell their packages to the big banks.

Sep 16, 2020 06:41 AM
Caroline Gerardo
Sun West Mortgage Corporation - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

If buyer is doing a government loan we all pool from the same source, rate varies daily but there is no great big difference.  Brand builders (I worked for one) like to use their inhouse because they can trust the inhouse to stay to their word.  If buyer needs any variation of just a little bit different they are better off seeking a mortgage banker

Oct 12, 2020 12:24 PM
Steffy Hristova
HomeSmart Elite Group Tempe AZ Tel: 480-966-9353 - Tempe, AZ
Tempe AZ Realtor - Your Home Close to Your Work!

Hi Joan, great post and it sparked a lively and informative discussion here. On more complicated loans, sometimes the mortgage bankers can be more resourceful and possibly more knowledgable, but it is always a good practice to check both options. The Buyer credit score is not impacted probably.

Oct 12, 2020 01:20 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Thank you for making your comments Caroline Gerardo I appreciate your perspective.

Oct 12, 2020 03:34 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Steffy, these buyers were stellar, so probably did not make a difference one way or the other.

Oct 12, 2020 03:34 PM