Most new home builders offer large credits to buyers who opt to use the builder’s preferred mortgage company.
The credits come in the form of interior “upgrades” (better floor coverings, cabinets, appliances, etc.) and/or in the form of closing costs.
Sometimes the builders’ offers are very competitive because the builders are willing to “give away the farm” (so to speak) to ensure that friendly forces control the financing.
This is because timing, and closing on time in particular, is extremely important to builders who desperately want to manage cash flow.
Builders need to recoup the cash they spent to build their homes ASAP, so they want to close as soon as the certificate of occupancy is issued.
More often than not, however, builder financing is decidedly not competitive; the credits are minimal and merely a result of the lender offering a higher interest rate.
For example, we recently learned about a buyer who was enticed to use a builder’s preferred lender because the lender offered a $5,000 credit for closing costs.
JVM’s credit, however, would have been close to $13,000 at the same interest rate.
This is because the buyer was using FHA financing and the credits for FHA buyers can be substantial, especially if a lender’s FHA pricing is competitive.
In any case, builder financing can be enticing but buyers need to make sure the enticements are actually worth something.
The above buyer actually left $8,000 on the table because she fell for a false enticement.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167