Be Wary of Builders with Huge Incentives

Builders are desperate to unload lots of inventory to anyone with a pulse as some home builders have been quoted saying. The builders are looking for you to buy and will bend over backwards to close that purchase. Sounds like a fun time to buy a home, right? Well…not exactly. There is usually a catch. You usually have to use their preferred lender and that’s fine, as long as they are competitive with other lenders or YOUR preferred lender.

Choosing the wrong mortgage can be an overly expensive mistake. It can make your upgraded and discounted home not seem like a hot deal anymore.

Your best bet before entering a deal with the builder is to check out loan rates and products with other lenders. You are allowed to choose your own lender, so don’t feel pressured by the salesperson to go with their chosen lender.

What is in it for the builder to have a preferred lender? Builders cannot take a kickback fee from the lender but if the builder has an ownership stake in a lending business, the builder can share the profits but this has to be revealed to you early in the deal.Â

Another reason why the builder would want you to sign on with their lender is to ensure closing is on time. Construction can be delayed many times and the builder wants to be paid on time when the home is ready to be moved into.

Builder’s incentives can be worth a lot of money nowadays (ranging from $10,000 to sometimes $100,000) and some of those deals may be linked to signing up with their lender (they want to entice you into the deal).  So try to negotiate with them on these incentives if you decide to get a loan with a different lender. In this market, the builder may just want to close any deal, if you have a solid loan approval.