During the process of purchasing a brand-new home from a home building company, you may have the option of working with the builder’s preferred lender. Some homebuyers wonder if this is the best path to buying a new construction home. While the answer depends on each buyer’s individual situation, you certainly are not required to obtain financing through the lender(s) your builder recommends. However, there can be many benefits to doing so.
What Is a Preferred Lender?
A preferred lender is a mortgage company that partners with a residential building company. The lender may be a bank, a credit union, an online lender or even a builder’s in-house lending department. In some situations, the preferred lender relationship can benefit all parties involved: customers receive financial perks such as valuable home incentives, the builder is able to sell its houses faster because customers have immediate financing options, and the lender gets more business. But before committing, it’s best for a borrower to first do some research.
Pros of Working With a Preferred Lender
Going with a builder’s preferred lender often saves a homebuyer a considerable amount of money on a home purchase. It can also provide a longer rate-lock period and streamline the mortgage application and closing process.
It benefits both the builder and the lender to use incentives to entice prospective buyers to purchase a home. Such incentives may include a lower mortgage interest rate, cash to cover closing costs or upgraded home features. The preferred lender may offer a simpler underwriting process and an extended window for a mortgage rate lock (60 days or longer) to cover any building delays.
The preferred lender can offer these incentives because it already has an established partnership and open lines of communication with the sales and construction teams. It has completed prequalification of the homes and simply needs to plug in a buyer’s information to finish the loan application process.
In addition, there may be a higher likelihood of approval when the lender already has a working relationship with the building company and trusts the quality of the home they are lending money on. Ultimately, this means your loan has the best chance of closing on time and you’ll get the keys to your new home without any financing-related delays.
A builder cannot penalize you for choosing a different mortgage company but you may not enjoy the same perks if you go with an outside lender.
Finding the Right Mortgage Lender
When making such a substantial financial commitment, you shouldn’t automatically default to a lender simply because your building company recommends them. You want to trust the mortgage company you choose, which means taking the time to shop around and understanding all requirements, terms and fees. Here are a few tips to find the right mortgage lender:
- Shop around. Research rates online, ask for referrals from friends and real estate professionals, and read reviews. Apply with at least three lenders and gather information on interest rates, fees and closing costs. Note that multiple loan applications won’t significantly lower your credit score if all are submitted within a 45-day period.
- Compare offers. Once you have details from each lender, evaluate the options. Some lenders may offer a lower rate offset by higher closing costs and fees. Others may provide faster turnaround but have a track record of poor communication. Weigh all these factors and make the best choice for your needs.
- Negotiate and accept. It is possible to negotiate with a mortgage lender if you have loan estimates from other lenders in hand. If you have a lower interest rate offer from one lender, show it to another lender and ask them to beat it. Once you have selected a lender, contact them as soon as possible to notify them of your intent to sign and begin the mortgage loan process.
About Gateway’s Preferred Lender
Choosing a mortgage lender is a crucial decision that will impact your current homebuying experience and your finances for years to come. Gateway has partnered with the Cheyenne branch of Fairway Independent Mortgage Corporation to provide many benefits for our new construction clients, including great rates, low closing costs and hometown service. The High Plains team helps us to streamline the homebuying process even further and provide extra convenience and peace of mind for our clients.
If you are ready to buy or build the home of your dreams, Gateway would be honored to serve as your building company of choice. Contact us to discuss your project by calling (307) 632-8950 or contacting us online. Let’s start building your future today!
