Should I get a loan from a builder’s in-house lender or an unrelated lender?

While you can borrow from any lender who will take your business, buyers who go with a builder’s in-house lender often get inducements and financial incentives. So while a builder can’t list a home for $400,000 and raise the cost by $10,000 if you go with your own lender, that same builder can reduce the sale price of that same house by $30,000, for example, for a buyer who chooses the builder’s preferred or in-house lender. And while there is money to be made within the in-house lending arena, the real reason most builders promote in-house funding is to keep the sale from falling through.

For consumers, one of the advantages of working with a preferred lender is proximity to the developer’s team (design, construction and sales personnel), the lender and access to important documents such as public reports, appraisals for certain loans, purchasing agreements and information about any covenants, conditions and restrictions applied to homeowners who live in the area.

Being at the center of the transaction can provide a great buying-lending experience that comes from having all those involved working toward the same goal from the same platform. It also means the lender and the builder can amend some rules expediting the sale, for instance, buying down the mortgage to lower your interest rate and reduce your monthly payments for the first few years, paying closing costs or sweetening the pot with credit toward options like better carpeting and kitchen upgrades.

Still, when working with an in-house lender, make sure your loan covers any fees associated with those incentives, extras or upgrades. Lock in a good interest rate on the loan. And find out the best time to solidify your rate.

Although the line of communication between the builder and their in-house lender should be wide open, don’t assume it is. It is important to know where your loan is in the lending process. So be your own lending advocate, and make sure the in-house lender is in touch with the builder and you.

Ultimately, and no matter what the incentives or enticements, remember, you have a choice about your lender.

So do your homework, compare loans, rates, costs for every portion of the deal. And find the option that is best suited to your needs.

If you have questions about financing a home, HomeLoan123.com is ready to help.

Keeping you informed.

Doctor Mortgage

To ask HomeLoan123.com’s Doctor Mortgage a question, e-mail: info@homeloan123.com