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When to Use a New Construction Company’s Lender for a New Construction Mortgage
For some reason, many home buyers see buying a newly constructed home as an entirely separate kind of real estate transaction where the traditional rules don’t apply and everything is as simple as buying a loaf of bread at the store. Sadly, that is not the case and more and more consumers are finding out that a new construction home is every bit as complicated as a resale.
Builders have quickly become some of the largest companies in the United States and they have done so on the backs of rapid growth in many areas of the country as well as the increasingly common practice of constructing entire communities instead of simply a row or two of homes.
More Money, More Problems
This rise in popularity has given builders a large amount of financial clout and a more complicated financial situation to boot as many are now publicly traded companies with shareholders, public perception and employees to keep happy all at the same time. To fatten the bottom line, which usually solves all three of those problems, many have turned to partnering with lenders they are either closely allied with or own outright.
Simply put, selling homes is just one part of the business model of today’s builder and while part may be dedicated to building commercial infrastructure into communities to reap greater profits, part is certainly dedicated to getting increasingly involved in the loan you take out on their new home.
The Big Catch
Many home builders will offer you an attractive set of perks to go with their financing options and all of those perks hinge on the catch that you use a specific lender outlined by the builder in advance to handle all of your financial dealings. When it comes to home ownership, that can amount to a pretty penny in interest payments and closing fees, giving those lenders a lot of wiggle room to use to create incentives for builders to recommend Joe’s Lending Agency.
Of course, when there is no competition for business and new builders are funneling clients into a particular lending agency, there is little push within that lending agency to offer rates lower than the competitor’s. In fact, as is often the case, by limiting yourself to a single lending option, you will end up seeing a higher interest rate and you will have no recourse available.
Sometimes, You Have to Play Hardball
While these financial agreements support the bottom line of many mainstream home builders, they are not the core business aim and if you threaten to take your business away, you can still be successful in removing restrictions on what lender you can use. Remember, you have the ultimate power to say yes or no to buying a home and that is extremely powerful.
If the final hurdle between getting you to purchase a $300,000 home and walking away is being able to use your own lender, nine times out of 10 the builder will let you use your lender for fear of losing the sale all together. The power of walking away is extremely potent when it comes down to these situations, but you have to make your stand well before signing on the dotted line. Once the contract is signed, your options dwindle.
A real estate agent can often be your best friend in these situations as they will have seen numerous new home builders try the same tricks of the trade. Don’t be intimidated by the fact that you are dealing with a large corporation and don’t think for a second that there is only one home out there. Shop around for your real estate, do your homework, and before you ever put pen to paper, get your own lender on the deal. You’ll thank yourself later.
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We respond right away! -Colleen Lane, Realtor®
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