When ever I’m working with a home buyer who may be considering new construction, I know I might lose them to the builder’s in house lender. Often times the builder will offer an enticing credit to the buyer’s closing costs only if they obtain their financing from the builder’s preferred lender.
How can having a Loan Originator (in this case, they are a retail sales mortgage person, or what ever Jillayne refers to them as 
since they wait to be fed from the builder, often sitting at the construction site) who’s livelihood is supported by the Seller (i.e. the Builder) be in the Buyer’s best interest? Who is looking out for whom? How do you know the Loan Originator will not disclose the Buyer’s private information to the Builder if pressed?
Enough of my questions…here are some of my recent dealings with the Builder credit when working with the preferred lender.
The builder offered a $4000 closing costs credit when working with their lender. After reviewing the builder’s lender (BL) good faith estimate (GFE), it was easy to see how they were doing this. The rate being quoted for a 30 year fixed was 6.125% at a 1% origination and a 0.125% discount. The actual current 30 year fixed rate that I would have quoted on that day was 5.875%. The BL was getting over 1 point (over $2000) on the backend of the transaction. Since the BL is a bank, the $2000 on the back did not show on the GFE. My client did not have the Truth in Lending to provide me, so I don’t know if there was additional padding with any prepayment penalties to credit the lender. If not, I am certain that the builder just increased his sales price by $2000 to fund the difference of the “buyer closing costs”. This is hardly a credit to the buyer in either case (price and rate increase).
A condo conversion buyer was offered $3000 if going through the BL. This builder/seller refused to negotiate on the price or the credit and really strong armed the first time home buyer. When it came down to it, the BL did not have the same program that I was offering the buyer. The buyer decided to walk away from the credit and have a lower payment instead with the program we had him approved for. If the buyer would have chomped on the credit, they would not have the program that was best suited for them.
This is just another example of why you should . Especially if you’re being steered to use a lender who essentially works for the Seller/Builder. If you are considering the “builder bait”, do get a complete good faith estimate to compare to what your Mortgage Professional is offering before you get “hooked” by the credit.
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Posted on May 6th, 2007 by admin
Filed under: Real Estate Guide
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