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Builder preferred financing vs outside financing
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When you are in the market for a new house the builder will try to pre-approve you and offer a closing cost incentive if you use their preferred lender or in house financing. You should always get multiple opinions and get a quote from outside lenders or brokers to see what the most competitive rates are. Sometimes the preferred lender is not the best choice because they will charge you excess fees thinking that you are stuck with them due to the closing cost credit and it could be in your better interest to use outside financing and lose the closing cost incentive for a much better rate.At times the preferred lender might not have they type of program that you would like, a pay option arm or even interest only products.
It is always best to work with a loan officer that you know has your best interest at heart. If your loan officer is lazy, unwilling to work with you to meet your goals, or hard to reach, consider finding a new one. It may be worth it in the long run to give up the builder incentives and work with someone who isn't going to make you pay a lot more for a loan that you don't even want.
Builders who have a preferred lender offer either reduced closing costs or builder upgrades if you use their lender.
When considering the reduced closing costs loan, it is wise to ask another mortgage professional what rate they would offer with the same closing costs.
When considering a loan with builder upgrades in return, ask yourself what you would be willing to pay for those upgrades and would you be willing to do without the upgrades for a lower rate.
Don't feel forced to use the builder's preferred lender. The cost of upgrades offered by builders may be absorbed through other fees. At the very least get a copy of your good faith estimate and review all closing costs. An upgraded counter top may not be worth the cost of refinancing out of a bad loan.
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