Lender for new construction home question

Hello All
New communities have their own preferred lender through whom we must prequalify. At the time of closing, do we have to use the builder's lender or can we use any other one?

I am thinking that outside lenders may have favorable programs like 10% down or better interest rate than wells Fargo or BofA. But will the outside lenders be able to close in time for  new construction?

Thanks

Irvinehomeseeker said:

Hello All
New communities have their own preferred lender through whom we must prequalify. At the time of closing, do we have to use the builder's lender or can we use any other one?

I am thinking that outside lenders may have favorable programs like 10% down or better interest rate than wells Fargo or BofA. But will the outside lenders be able to close in time for  new construction?

Thanks

Click to expand...

Almost all new communities require you to first get preapproved with their builder's lender.  They usually offer some kind of benefit, whether closing cost credit, builder credit for design, or competitive rates.  After that, you can use your own financing assuming it's better.  Outside lenders usually always close in time as long as it's a big enough institution.  I only have experience with Wells Fargo, no issues there.  Bofa should be good too, Soylent works there so you can hit him up to beat the builder rates. 

Roughly 60 days prior to closing most, but not all builders will require you to finalize who you are going to work with. Keeping that in mind, even the "builders preferred lender" might run into an issue and close late. If you are going to work with an outside lender, be sure to get in writing what their policy is on late closings and "per-diem" charges. Some lenders will cover the per-diem if it's the Banks fault. Some Banks will not be as customer friendly on the subject.

At day 65, get the builders lender's "best and final offer" which must include any concessions given by the builder as an incentive to use this lender. Then get 1-2 additional quotes and commit by day 60. Add to your decision tree some of the intangibles like responsiveness, local versus call center, are you working with a refinance shop like CashCall or a purchase focused lender. As said many times here on TI - That "great rate" really doesn't seem so great when the lender blows your deal up.

By day 60, you should have stopped chasing product (LPMI, 80/10/10, rate reductions by depositing money in the funding banks system, etc) have been loan approved and ready to move, and are focused only on price and service. I'd strongly recommend you settle the product question by day 75. If you need a low down program, work out those issues early on with 2-3 lenders, then settle on price by day 60. Don't chase price then ask if a low down option is available. You may have a great rate locked, but now that lenders low down payment product is a stinker. Solve product issues early as they are the largest reason why purchase loans close late.  Finally, if you're wanting a "unicorn loan product" - high ratio ARM product, a Bank Statement only product - be sure to be ready for a potential "Plan B" should that unicorn become extinct. All of this goes into the lender decision first, then rate, along with ability to close on time.

Hope this helps.

My .02c

SGIP

Irvinehomeseeker said:

Hello All
New communities have their own preferred lender through whom we must prequalify. At the time of closing, do we have to use the builder's lender or can we use any other one?

I am thinking that outside lenders may have favorable programs like 10% down or better interest rate than wells Fargo or BofA. But will the outside lenders be able to close in time for  new construction?

Thanks

Click to expand...

Pre-qualifying through the preferred lender is much like vetting: if you are able to pre-qualify through the preferred lender, then there is a much higher likelihood of you being able to perform and close on the deal no matter which lender you ultimately choose.  In my case I was fortunate that the preferred lender was the financial institution that I already bank with. Relationship banking got me a rock-bottom rate and the preferred lender status through the builder also got me a few thousand dollars to help with closing costs.  But do shop around as you might be able to beat the preferred lender's pricing even with the incentives that they may be able to offer.

for me the builder's preferred lender offered diddly squat.  i pre-qualed through my own institution and due to my relationship with them got a much better rate and closed with them instead of the builder's lender.

what are the items, buyer need to negotiate with Lender?

a. Rates
b. Closing costs

are there more?

You can shop the rate and origination fee. You aren't going to have much "negotiation" power if you can't find a lower documented rate/fee though.

oc.queries said:

what are the items, buyer need to negotiate with Lender?

a. Rates
b. Closing costs

are there more?

Click to expand...

Here's the remaining data needed for a solid, deliverable rate quote to compare with any other lender

c. Has to be in writing.  If not then the rates and fees quoted are fake news SAD!

d. Same length of lock. I get all the time... Buyer: I got this great quote. Will you match it?. Me: How long is the lock? Buyer: 45 days. Me: When are you closing? Buyer: 60 days from now. Can you still match their rate?

e: A contemporary FICO score. As well, it's "Buyer: I got this great quote. Will you match it? Me: What is your FICO and when did you run credit? Buyer: The lender says it's 790 from their report back in August of last year. Since then I've bought a car, financed my appliances, and opened 10 credit cards since, but use the 790 FICO, I'm sure it's still good."

These 5 things provided by any lender will give you an apples to apples comparison opportunity. If any one of these items are missing, it's not going to work.

My .02c

SGIP