As you know, there are a lot of decisions to make when you’re moving.  Once you have determined the right city, the right community, the right builder, the right home, and the right it’s time to secure the right financing.  When you decide to buy a home, it is very likely that the builder will have some form of partnership with a lender.  There are a number of reasons that builders have done this.

Their primary reason is to control the quality of the transaction and to ensure that you close when you are supposed to close.  I certainly cannot blame the builders, because many “lenders” are incompetent and they fail to meet crucial deadlines.  There has been a great demand for loan originators and many rookies have rushed to fill the void.  This level of inexperience creates a huge margin for error resulting in anxiety, surprises, broken promises, and missed closing dates.  It’s terribly frustrating to everyone involved. 

Another reason builders have partnered with lenders is because it’s a profit center for them.  The challenge is that many builders take advantage of people in this manner. For example, builders tie incentives to the home IF you use their lender. I’m OK with that IF they are truly incentives.  We all know nothing is free. If it’s “free,” raise the red flag and wonder how you are paying for the “free” incentive.  For example, with the assistance of a “Certified Frisco Realtor®,” you and the builder agree about the fair value of your new home.  They mention that IF you use their lender, they will pay your title policy.  Will they really? 

Yes…but you will actually end up paying for it... here is how.  You are sent to their lender who KNOWS that you are “tied” to them (big grin).  They don’t have any competition because if you don’t use them…you don’t get the “freebie” (raise the red flag).  Let’s say that the market rate for a 30 year fixed is X%.  They will often charge you a rate that is .25 to .75% higher than the market rate.  As a result, your lender will receive a significant rebate from the bank.  What do they do with the rebate?  They pay your “free” titleBut wait…who pays for it?  Since your rate is now higher by .25 to .75%, your monthly payment will be higher. If they “give” you a rate .5% higher on a $250,000 loan, your payment will be $80 - $100 higher every month.  So…you are paying for your title policy through higher monthly payments.  You will pay for the “free” title policy every month you are in your home.

However, it must be stated that there are times when this arrangement is good.  If you have a good deal, we will tell you to keep what you’ve got.  But, if you don’t, we will give you options.  The Frisco Home Center believes in teaching you the tricks…rather than playing them on you.  We will help you evaluate your builder’s Good Faith Estimate to determine whether or not you are being taken advantage of.  We believe in great service and fair profits, but we don’t believe in taking advantage of people’s naivety. 

Your mortgage professional should:

  • Be seasoned and experienced.
  • Carefully analyze your over-all financial picture to present you multiple options consistent with your short and long-term payment and equity objectives.
  • Give you payment options and show you how they impact you now, 3 years from now, and even 5 years from now.  Different options impact you in different ways over a period of time.  You should be shown the difference.
  • Be very responsive to you.
  • Be competitive in the marketplace.
  • Present a broad portfolio of wholesale options as opposed to one big bank (with limited options). 

Please let us know if we can help you in any way.

Posted by Sammy Gardner on
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