When you’re buying a new home, you have the option to shop around when it comes to finding the best mortgage. However, you may want to consider working with your home builder’s preferred lender.
It’s natural to think that the builder is only recommending someone because they're getting a kick-back, but there are plenty of reasons why it makes sense to use a builder’s preferred lender. Below are some of the reasons why it may be the best option for you.
Locking In Your Interest Rate
The interest rate is one of the most important factors when you buy a home because it can dramatically affect the monthly payment. Typically, when you first apply for a fixed rate mortgage, the lender will lock in that rate for a certain period of time.
When it comes to traditional mortgage companies, the locked in rate period is between 30 and 60 days. That’s plenty of time for a family who’s moving into a home that’s already built, but not long enough for a family building a new home.
Using the preferred lender is beneficial as they have the ability to lock in your mortgage rate for a longer period of time which can be up to 12 months for some rate holds. In addition, when it comes time to finalize your mortgage and move into your new home, they will review the current mortgage rates and apply the better rate if they have changed.
When it comes to a new community, some lenders are wary of approving mortgages because it’s difficult to appraise a new home in a development that’s just getting started. After all, there aren’t many other homes in the neighbourhood, so it’s hard to get a handle on what the home will truly be worth.
Your builder’s lender is different and won’t hesitate to give you the full value of your new home. They already know the value of the community and are confident in their appraisals, even without other homes to compare. They’re willing to look toward the future value of your home, knowing it will grow with the neighbourhood.
Streamlining the Process
Purchasing a new build home is different to buying an existing house. When building a new home, deposits need to be made at different stages of construction.
One of the biggest advantages to using the builder’s preferred lender is they will be familiar with the process and your builder’s timeframe. They’ll have all the necessary paperwork on hand and be ready to deliver funds at each stage.
Preferred lenders are also time sensitive. They’ll respond to inquiries on evenings and weekends to keep the process flowing smoothly. Preferred lenders also work with appraisers who are already familiar with the style of the builder and the typical appraisal values for the builder’s homes. When you use a lender who’s not acquainted with the process, there could be more delays.
Getting Your Down Payment
Many new homebuyers need to sell their old home in order to get the down payment necessary for the new one. Unfortunately, this creates an impossible time crunch, as the family needs to vacate their current home for the new owners while still waiting for their new home to be built.
Preferred lenders help you manage this process. For instance, you could take out a line of credit on your current home to use as the down payment, then continue to live in it until the new one is finished. Once the new home is ready, you can sell your old home and repay the line of credit with the earnings from the home sale.
Working with a preferred lender makes it a lot easier; especially since not all lenders know the best way of managing this process.
Saving on Fees
As you probably know, there are many fees associated with closing on the mortgage. You’ll have to pay these fees upfront at the time of signing, whereas a builder will typically waive the legal fees associated with a mortgage when using their preferred lender and lawyer. This can save you around $1,500 to $2,500. Those savings can make a big difference in your closing costs.
Not everyone’s finances are the same, but it’s smart to take a look at what our preferred lenders have to offer. We don’t recommend lenders for our financial gain. We recommend them because they are easy to work with. In most cases, our lenders offer comparable rates to other lenders, and the convenience associated with working with these lenders far outweighs any minor savings from your other options.