Wednesday, June 26, 2013

Do I use the builders mortgage person or someone I already have?

Do I use the builders mortgage person or lender I already have?

Many buyers establish a relationship with a mortgage broker or loan officer before they start their home search.  They turn over their bank statements, W-2's, and financial information in order to qualify for loan and be prepared to embark on their home search.  As they search for a home they consider both resales and new construction.  New construction has many benefits, its brand new, you get the latest floor plans and trends, and you get more energy efficient homes.  New construction communities always has a small list of preferred lenders they want you to use to do their loan.  They will even pay for some of your closing costs if you decide to use their lenders.

Am I saving anything if the builder pays for some of my closing costs?

Maybe.  It depends if you can get a competitive rate without paying for points or having a high origination fee. I have seen builder lenders offer very good rates, and others offer high rates.  If you are not sure what to do, I suggest you get a quote from the builders lender and your lender on the same date and compare. Lenders can also provide you an initial cost worksheet to compare the itemized lender charges, in addition to comparing interest rates.

New construction builders are raising prices each month and truly a seller market, as a result closing cost concession continue to decrease and many under $5,000.  During the buyers market, concessions where as high as $10,000-20,000.

What you need to ask about the builders closing cost contribution?

Does 100% of the amount come from the builder or any portion funded by the lender?  The sales representative WILL NEVER tell you.  They either do not know, or you did not ask the specific question. This is how it works. Let's say you use the builder's lender and in exchange they will pay you $10,000 toward your closing costs. But at closing you learn that $8,000 came from builders pocket and $2,000 from the lender's pocket.  What they did not tell you that you received $2,000 as result of a higher interest rate, which is called a lender credit.  This is a real life example.  So before you become enticed in the extra money make sure you ask the right questions.

When do I need to decide which lender I am using?

If  you are ready to buy a new construction property, it's best to decide who you want to use for mortgage to get financing before you sign the contract.  It is not an absolute must, but some builder contracts allow for flexibility in choosing lenders, where others need a special addendum written in which builders do not like to do.

Are you looking to buy new construction property in Central Florida?  Remember to bring your Orlando Buyers Agent with you to help you handle all the details.