Builder Lending Sucks
If you have ever purchased a home from a new home builder you may know how frustrating it can be to deal with their financing. Most often, their closing cost help is tied to you using their lender. Sometimes you will find that the whole transaction is tied to the use of their lender!
WHY???
Many builders do all they can to have you use their financing (does anyone smell steering), because they make bank through their financing. Sometimes they make more money through their financing than they do through selling the home. If you don’t believe me, check out your truth in lending statement when you apply for the loan.
Do You Have Options?
Sure. You can always use your own lender and most likely get a better rate. However, you loose their closing cost assistance 90% of the time. So, most will take a higher interest rate for the closing cost help. Keep in mind that not only are you getting ripped off with their rates, these lenders usually charge some form of a discount point just to do the loan. Does it give you a discount? Very rarely. Therefore, you could be getting 8k in closing and loosing 4k in crap fee’s charged by the lender.
What Can You Do?
It is wise to be qualified by a lender before ever walking in the door of a builder. You and your Realtor may be able to negotiate in the deal the use of your lender for you to buy the home.
I am not the first to complain about this issue. This issue is a borderline illegal and many builders no longer force the issue. There is a law that is being passed that should stop this form of steering very soon. I will keep you updated.
