Recently I had the opportunity to sit down with Sabrina Schell from Southeastern Mortgage and discuss the mortgage process for new construction.
Sabrina clears some of the confusion.
Should Buyers Shop Around?
Many builders’ contracts are long. There may be 30, 50, 80 pages of an addendum. Mixed in there the sales agent tells the buyer over and over again, “Our in-house lender will give you a great deal. Our builder will pay $5,000 in closing cost if you use our approved lender.” When the buyer comes to me they want to know if that is a good deal. Should they shop it around?
Sabrina Schell says absolutely! “Sometimes it isn’t the builder that’s paying the closing costs. Sometimes, it is the builder’s lender that is paying the closing cost or a combination of that. The builder’s lender is not compelled to find the best deal for you, the buyer, because so much business is funneled to them by the builder.”
It’s important for prospective buyers to understand that sometimes in cases where they are told the builder is paying the closing cost it is actually the lender paying them.
Sabrina confirms that sometimes it’s a lender, sometimes it’s the builder and sometimes it is a combination, “There are lots of reasons for the builder to want you to use their lender. It’s easier for them to get all of their builder documents to one place instead of multiple locations. Builders also need a confidence level that the buyer can buy the home. They don’t want to start the construction of a home not knowing the buyer can buy.”
Are there other reasons builders want buyers to get pre-approved with their lender?
We’re seeing many builders that say buyers can use whatever lender they want. However, the builder is not going to start the build process until buyers get pre-approved by the builder’s lender.
According to Sabrina, the builder knows that the buyer is going to be overwhelmed with all of the other choices that are involved with the home building process. “Most folks are likely to, once they’ve crossed getting pre-approved or loan application off the list, to concentrate on the other choices they need to make. They think they’ve already started, might as well just stay there.”
Don’t become complacent.
There are so many decisions in the building process; the selections, and the financing and the site visits. It may be that some of the builders’ lenders are banking on the fact that the buyer will be complacent. As a buyer’s agent, I don’t want my buyers to be complacent. I want them to get the best deal. Sabrina says there is every reason to talk to her and compare what the builders are offering with what Southeastern Mortgage, can offer. Then the buyer can make an informed decision about which way they want to get their loan.
“Southeastern Mortgage is a broker, a wholesale broker. We’re able to find lenders that want to attract new construction customers, and they offer extra incentives towards closing costs that you, the buyer will realize.”
Buyers will be potentially saving by seeking out a wholesale broker than a retailer and that is truly valuable information.
If you have any questions about negotiating contracts for new construction or navigating the mortgage process for building a home, please contact Amy Shair, buyers’ agent, for answers that save you money.