Home Buying in Sunnyvale>Question Details

Saori, Renter in Sunnyvale, CA

We are a couple considering buying a 2Bed/2 Bath TownHome at Fusion by OBrien at Sunnyvale, and would like having some advice from expert in the R.E.

Asked by Saori, Sunnyvale, CA Tue Aug 21, 2012

The developer would like us to use their preferred lenders, they said that financing for new construction is very difficult so they suggest us to work with the preferred lenders since they already have the Project Approval needed to finance transactions there. They said that other banks have tried and failed to obtain this project approval.
The loan rate of their preferred bank (Wells Fargo) is higher than the other banks and is fix.
The preferred lenders give 5K back for closing costs

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They can suggest a "preferred" lender but cannot force you to use them as this is against RESPA. Unfortunately this is more or less what builders do! However, you may not have a choice as getting financing for newly constructed condos is particularly thorny. I'm not sure how you have compared their rate to that of "other banks" as this can only be done by comparing GFE's (Good Faith Estimates). This will take into account the LTV, your credit score, type of home (condo), as well as any adds the lender may impose for an immature HOA (it may not have been handed over the owners yet). It also takes into account the 5K rebate for closing costs which increases the rate. tony@svmortgageguy.com
1 vote Thank Flag Link Tue Aug 21, 2012
Fusion is strict that if you signed in without your agent they will not pay a commission to your agent. They also have a no haggle policy. So with that to answer your question;

In new contraction the builder passes on what is standard and typical in closing cost to the buyer. So Escrow, Title and Transfer Fees are now your responsibility. This adds to your cost of the property.

The Builder likes you to use their lender because of appraisal issues and because that lender has seen the HOA documents and is familiar with the project. I don't understand why another lender wouldn't approve it if Wells Fargo can. I would ask what the reason for failed approval from other lenders.

The Builder gives a cash back option to the Buyer when they use the preferred lender because using the preferred lender makes their job smoother and easier. This cash back usually equates to an amount near the closing cost they are passing on to you. So don't be fooled. I have seen builder's lenders offer competitive rates. It's not just the interest rates but all the other fees you will want to review. Also, compare lender to lender rates on the "APR" and on the same day as rates, like the stock market, change daily (sometimes hourly).

Finally, be sure to read and understand that contract. It is weighted in the builders favor, it is a passive not active contract, and you may not have the contingencies you need to protect your earnest money.

Have an amazing day and all the best in your new home.
Web Reference: http://www.terrivellios.com
1 vote Thank Flag Link Tue Aug 21, 2012
Dear S,
Firstly, did you go to Fusion and register with YOUR Realtor for Representation? If you are already registered without one, then they will NOT allow any realtor to help you through this process....and trust me it is a LONG process till close of Escrow. Your own representation is very important to understand the Stack of papers they give you to read and go throught before you go there to sign them all!!
If you havent registered with them, and want to work with me, please do get in touch with me, I know new construction process very well, have closed several all over the Bay area with different builders.

My Buyer is Buying a Home there, we have written the Offer and are in the process of choosing Options/upgrades that she wants in the Home....and go through steps of purchase.
There is a good amount of Demand - 4-5 Buyers for every home, and Fusion is NOT offering any upgrades or money back for closing costs or anything.......
My Buyer has chosen to work with Jim - their prefered Wells Fargo Lender. His rates are pretty reasonable and because they are the Approved preferred Lenders are able to give $5K back towards closing costs. Jim has been very responsive and efficient in providing us with whatever explanations and clarifications we have asked for........
No outside Lender can Fix a rate for you for the next 4-5 months till the property gets built, only their lenders can.....and interest rates arre Low right now and are creeping up! So, Locking now with them would be a sensible thing...who knows what the outside rate will be in Jan-Feb 2013.

Wishing you the Best in the choices you make,
Nina Daruwalla
Ph: 408-7773823
0 votes Thank Flag Link Tue Aug 21, 2012
Thank you for your questions.

There are at least two types of approvals that are required for new construction lending on a condominium project, 1) Project Approval for the community and 2) Credit Approval for the borrower. Using one of Fusion’s preferred lenders is encouraged because these lenders have already obtained Project Approval at the institutional level, leaving only one additional approval to secure for the borrower.

This helps to speed up the buying process because obtaining Project Approval can often be a very lengthy process (months in fact), as it involves extensive review of the project’s legal documents, conditions of approval, CC&Rs, BMR Agreements, HOA bylaws, financials and budgets. So, it’s not that other lenders can’t approve Fusion, it’s just that the process can easily become lengthened and even stuck if the lender is not entirely familiar with the process and lending on a new home construction project that is not 100 percent complete. Often this leads to unnecessary time being invested in the process and frequently results in the outside lender not being able to complete the process in time to close escrow.

At Fusion, our homeowners are not obligated to use our lenders and can obtain a loan from any lender they choose. We do have three preferred lenders available for borrowers to shop rates and choose a lender which has the loan product that best meets the needs of the borrower. Fusion’s preferred lenders are 1) Everbank, 2) First Republic Bank and 3) Wells Fargo. You can find more info on these preferred lenders on our website here: http://www.fusionsunnyvale.com/buying/preferred-lenders.php.

Fusion also offers a $5,000 incentive to encourage buyers to use our lenders so buyers can focus on getting credit and loan approval for their new home loan completed as soon as possible (rather than worrying about the Project Approval with an outside lender).

If you’d like to get more information about our preferred lenders or the borrowing process, please feel free to contact me at (408)736-7388.

Thank you,

Debbie Yates

Fusion Sales Associate

DRE # 00643843
0 votes Thank Flag Link Tue Aug 21, 2012
Check the preferred lender terms, specifically for when you will be able to refinance. Then go with the preferred lender for fast closing and shop around for your next loan.
Web Reference: http://talisrealestate.com
0 votes Thank Flag Link Tue Aug 21, 2012
Hi Tony,
Good to see you on Trulia.

Hi S.
What Tony is referring to at the end of his post is the fact that all lenders have a sliding scale of point(rebates) vs. interest rate they can offer.

If you PAY $5k in pts, you get an extremely low interest rate.
If you PAY $4k in pts, you get a low, but not as low interest rate.
If you neither pay nor receive pts, you get a medium interest rate.
If you RECEIVE $4k in rebate, you have a higher interest rate.
If you RECEIVE $5k in rebate, you have an extremely high interest rate.

I just used dollar value $4k, $5k to make it easier for you to relate to what the preferred lender is doing, but in practice the pts and/or rebates from the lenders will be charged/offered as 1pt (meaning 1% of the loan amount), 0.5pt (meaing 0.5% of loan amount), etc.
0 votes Thank Flag Link Tue Aug 21, 2012
Hi S.
You do not have to go with their preferred lenders, but they are a good starting point. Fusion actually has a list with several choices of mortgage professionals to call. Have you already called all of them to shop for rates?

Also, when you compare lenders, you have to take that $5k for closing costs into account. You should compare apples to apples.

Robert Lei
(408) 893-2410
0 votes Thank Flag Link Tue Aug 21, 2012
T.F. we would like to know if we have to go with the referred lenders recommended buy the developer??
0 votes Thank Flag Link Tue Aug 21, 2012
S I am not too sure what your question is but here is an article on my real estate blog on some of the pitfalls to avoid when buying new construction homes http://bayareaconnect.com/how-to-buy-new-construction-homes-…

If you are interested in sitting down to discuss your situation, how to buy new construction homes and what to expect in this current market give me a call at (408) 840-3852 or Thomas.Feng@gmail.com
Web Reference: http://BayAreaConnect.com
0 votes Thank Flag Link Tue Aug 21, 2012
Red flag: "They said that other banks have tried and failed to obtain this project approval".... I recommend you find out exactly why other banks won't loan on this property.
0 votes Thank Flag Link Tue Aug 21, 2012
Read carefully the terms for their preferred lender. If this is the only option you have, see if there are any pre-payment penalties. Otherwise you could go with their lender and refinance later on for a better rate.

You are better represented with a Realtor on your side. Your realtor protects your interests and negotiates for you. I work with different lenders who do almost any type of loan. As Allison suggested negotiate on the upgrades. Good luck with your purchase!
0 votes Thank Flag Link Tue Aug 21, 2012
Just so you know you should ALWAYS bring your realtor with you when you sign in, because this is exactly why you would need one to help you negotiate. If you don't have one there are several of us here who work sunnyvale and have helped clients purchased new construction. With that said I would still check out with my banks or lender if they would or have they lent on this project. Have you negotiated any upgrades? Most new contructions will not be as flexable on price, but will be open and flexable on upgrades so if you haven't already that needs to be looked into. When you add everything in go with the best deal for you.
If you would like some assistance, feel free to contact me.
At your service,
0 votes Thank Flag Link Tue Aug 21, 2012
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