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Old 08-27-2007, 08:54 AM
 
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Pretty much every builder offers incentives for using their preferred/in-house lender. I had always assumed the lender's rates would be higher than you would get on the open market, therefore nullifying any potential incentive.

However, I went to visit a new community last week, and their in-house lender is offering a 30 yr fixed at 5.5% (assuming your credit qualifies). Now I'm wondering if most in-house lenders offer low rates, or if this is just an anomaly. Does anyone know if preferred lenders generally charge above-market rates? I know 5.5% is super-low, but can I expect preferred lenders to match what I can get on the open market?
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Old 08-27-2007, 09:02 AM
 
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This is true have seen it before, if there incentives are paying for closing costs they buy down the rates, They get better deals with certain banks because they feed them more loans. and they certainly can match outsiders rates to get the deal done. There perferred lender is usually just another part of there company so they are just paying themselves.
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Old 08-27-2007, 02:23 PM
 
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i'd make sure it wasn't an introductory rate..
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Old 08-27-2007, 02:43 PM
 
Location: California
510 posts, read 3,070,127 times
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In addition make sure you get a real market value of the property. Builders are currently in a frenzy of giving you incentives. In CA most builders are giving you $30-$80K off of the price, or adding in upgrades and a deduction in price. Some help with closing costs and offer you super low financing, which it sounds like your builder is. If the house has a realistic market value, and a 5.5% 30 year fixed it's a sweet deal. As bigthirsty mentioned, it could be some trickery to bring you in as well. Teaser rates, 2-5 year fixed... currently the conforming rate is around 6.25% as of today, which would probably cost you around 1point total.
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Old 08-27-2007, 02:46 PM
 
Location: Gilbert, AZ (SouthGilbert)
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It might be a adjustable rate. 5.5 seems very low. If your credit is perfect and you have money to put down and your income is high, then it is realistic.
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Old 08-27-2007, 07:04 PM
 
Location: NE Florida
17,835 posts, read 30,864,311 times
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also make sure you aren't paying extra in closing cost. When we thought we were moving the builder offered us $7500 in "closing costs" to use their lender. When I compared the closing cost with USAAs mortgage division. What a "surprise" the builder was .50 higher on the rate and close to $5k in closing costs higher.
Lets say it was an interesting call with the builders lender once I got the information.
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Old 08-28-2007, 12:17 PM
 
Location: Indian Land
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I used my builder preferred lender (SunTrust) and got a great rate and the builder paid all closing costs. It was simple and smooth. My rate was lower than what some brokers were offering. I actually got money back at closing, you just need to be careful and still shop around. I must say though Sun Trust was great!!
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Old 08-28-2007, 12:52 PM
 
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I got the same 5.5% interest with 20k incentive. After you read through the red tape it may not be a bargain. The 20K incentive is pay down to 5.5%, from whatever the market is when yo lock in. Once you get there the remainder (if any) can go to the cost of the home... Depends on how you look at it but in my case it works out better with me going with my relo finance company at 6.125... my company picks up all closing costs
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Old 08-28-2007, 01:02 PM
 
4 posts, read 20,679 times
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Quote:
Originally Posted by Go Blue 99 View Post
Pretty much every builder offers incentives for using their preferred/in-house lender. I had always assumed the lender's rates would be higher than you would get on the open market, therefore nullifying any potential incentive.

However, I went to visit a new community last week, and their in-house lender is offering a 30 yr fixed at 5.5% (assuming your credit qualifies). Now I'm wondering if most in-house lenders offer low rates, or if this is just an anomaly. Does anyone know if preferred lenders generally charge above-market rates? I know 5.5% is super-low, but can I expect preferred lenders to match what I can get on the open market?
The person who said that the 20k was used in a buy down is on target. I snipped this from another of my posts, as I think it may help...
snip...

Some builders tactics to be wary of:
5k, 10k, or any other sum of money that they'll "give" you for closing costs if you use their lender and title company. These incentives aren't always bad, but nothing is free and the costs will be built back into their fees, rates etc. When you purchase, ask your real estate agent to advise you, and always seek other competitive mortgage/title company bids. In a resale, the seller pays for the closing fees/title search etc and they usually decide the title company/closing company. When buying from a builder, you'll usually pay for those fees, so you should decide. One reason for not going with the "approved lender, title company" is because if you're having second thoughts...or...if the builder wants you to close with significant items still unfinished (with promises to fix later) you'll be well advised to stand your ground and refuse to close until the fixes are completed. I'm not talking minor cosmetic things, but the horror stories I hear are prevalent. If you use their lender/title company, then they'll leverage those entities against you into pressuring you to close when the home is not ready.

You can get a good deal if you buy an inventory home, one that is costing the developer money each month. Another thing to avoid, don't sign any paperwork authorizing the builder/developer to use your escrow deposit for any part of the financing of the project (I've seen this in Orlando, and have spoken to many furious investors who lost money by not having their money held safely in escrow).

Good Luck,
Tom Kessler
Orlando
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Old 08-28-2007, 02:11 PM
 
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I am getting close to $9k in incentives from my builder for going with their broker. In the GFE, closing costs are a bit high so I compared to just going straight to the lender and the builder's broker is charging me 2 points for the same rate!

I still think it is a better deal...basically paying $5k to save $9k and I get a lower sales price which means lower taxes and supposed "immediate equity" because the house is worth $9k more than I will be paying for it.

I am going to try and get those points lowered, but even if they don't it is still a decent deal.
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