There are many routes for choosing a mortgage. While it's always good to compare options, one option you may want to consider is working with your home builder's preferred lender.
A builder's preferred lender offers many perks, including the opportunity to save money on financing, special incentives, competitive rates and more. Read on to learn about why a preferred lender may the best option for you.
Easier Approval Process
One of the drawbacks of using a bank to buy a brand new home is that they don't fully understand the buying process. As such, it can be a bit harder to find a lender willing to approve a mortgage. A bank who doesn't work with builders finds it more challenging to appraise when the development is brand-new as there aren't other homes to compare it to.
The builder's preferred lender operates differently. Because they're familiar with the details of the development, the builders specification, and already confident in their existing appraisals, they will assess your new home at its full value.
Your mortgage interest rate is one of the biggest factors in determining your monthly payment. Even a small increase can affect the affordability of your home. Lenders typically offer a specific lock-in period when they approve a mortgage to guarantee your interest rate.
This period is usually 30-60 days, which is generally enough time when you're purchasing an existing home. With a new home build, however, you'll need to wait until it is built before your loan closes.
The preferred lender can give you a much longer lock-in period (usually up to a year) to ensure your rate remains the same, no matter how long it takes for your home to be built.
Familiarity with the Process
The builder's preferred lender can typically offer a more streamlined mortgage approval process as they will be familiar with the builder's timeline, including when deposits must be made at specific stages of construction. Because the lender can anticipate what will be necessary during the construction process, they can have funds and documents ready to avoid delays.
Home builders work with lenders who have shown the builder can rely on them for prompt loan processing and closing. When you buy a new home from a builder and choose a lender who is not familiar with the development, you may experience delays as well as more frequent requests for documentation. This can be especially stressful when you're moving to a new area!
Closing costs can easily top $5,000 on a home purchase and add to the amount you need at closing. One of the best perks of working with the builder's preferred lender is the opportunity to save on fees. Builders and their preferred lenders often waive certain fees for several reasons, including volume pricing and the fact the lender is already familiar with the details of the development. These closing cost incentives can save you thousands of dollars on your purchase price.
While these are the major benefits of working with a preferred lender, you may enjoy these other perks, depending on your financial situation and qualifications:
- Faster pre-approval
- Competitive interest rates that are usually the same as those offered by other lenders
- Special financing programs
- Several types of loan programs
- Evening and weekend appointments with a loan officer
- Frequent status updates on your mortgage process
These are just a few of the many potential benefits you can enjoy when working with your builder's preferred lender. At StreetSide, we recommend lenders we know are easy to work with and have a track record of speedy, problem-free closings for the greater convenience of our homeowners. That being said, make sure you choose a mortgage option that's best for you.