One builder that I work with has decided to have all buyers qualify with a certain loan company. They state clearly that the buyer may coose to work with any lender they want as long as they have this "back-up lender" in place if the first cannot provide the money at the last minute..
The reason for this is that we sell many homes to people who are moving in from another state. Many of those buyers come to us with a letter from a lender who does not know the specifics of the taxes here in our state. As a result they often OK a purchase price that is not realistic when the real tax burden is taken into account.
I just had an out of state lender letter for the nicest lady, saying that she could qualify to purchase a home in the $185,000 range. That would have qualified her for a small new home in this builder's community.
Unfortunately when I checked the real numbers against her income levels I felt that she needed to stay under $160,000. That meant that she needed to be looking at an older home, or a townhome, not new construction, detached.
She was skeptical, and then very disappointed when she found that my numbers were more realistic. We had a good ending though because she found a teriffic property that somebody has remodeled so that it looks and feels brand new. Yeah!!
If I had not known from long hard experience that lenders from her area often over qualified buyers for my area, we could have found ourselves under contract for a home that she could never have got through closing.
Even worse is the case where a buyer does not find out that their loan will not clear until they are sitting at the settlement table. (Yes, that has happened all too often.) We can argue until the cows come home as to who is at fault in that sad case, but that is why the seller wants to stipulate that a lender he knows and trusts has to confirm the ability of the buyer to purchase his homes.
I can't answer the question as to the legality, or if the practice would hold up in court, but I certainly understand the reasoning. As long as the actual lender is not mandated, I don't mind having my clients comply as long as there is no charge to the buyer.
It sure beats having the moving truck sitting in the driveway, but no money at the table.