New home with Toll Brothers - how to finance ?

Asked by Phil, 20855 Thu Sep 25, 2008

I recently signed an agrmt of sale to build a home with TB. Delivery is expected May 2009. Price is $890k, with about $200k in incentives discount, down 20% .. in the end, I expect to borrow about $620,000. This is still under the $729k conforming jumbo limit which ends 1/1/09.
- Who provides this type of loan? I am looking for 30yr fix rate conforming, with excellent credit.
- is it easier to go in-house? TB has their TBI Mortgage subsidiary which they encourage me to apply tor, but TBI said no lock-down possible until and unless within 45-60 days of settlement (i.e. completion date). So if the house is expected to be completed May 1 09, I cannot lock in a rate until after March 1, 09 or so.
- What happens if TBI comes back and give me a high rate then? What is my recourse?
With all this mess in the mkt, who knows what the rates will be? I am not sure what if TBI gives say 10% rate in March and I have to accept b/c I need a loan to move in.
Comments? Thx.

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Tim Freund, Agent, Westlake Village, CA
Fri Sep 26, 2008
TBI is correct in that you cannot lock in until you are much closer to delivery. Additionally the builder likely conditioned their concessions to you're using TBI, which will pretty well lock you into their system. Moreover regarding the Jumbo conforming... all jumbo conforming loans will need to be closed by 12/1 or 12/15 or else they will not be able to be packaged as jumbo conforming - even thought eh deadline is 1/1/09, lenders won't be able to sell them to Freddie/Fannie that late. Since you are at $620K you should be fine under the new Housing Bill's $625K conforming limits. This actually works to your benefit since the interest rate for conforming is lower than the jumbo conforming rate today. Further you will find the approval process, ratios allowed etc., is automated under the conforming limits, so qualifying is easier. As for recouse in the event the rate is higher than you want... you should review your contract to see if there is a cap on the rate that would allow you out of the agreement. But keep in mind, TB wants you close on your $800K+ home, not stick you with a rediculous rate, however the rate will be determined by market conditions at the time you close. You may choose to fight them if necessary to allow you to shop outside without losing your concessions, but TB will be very resistant to this. In the end, if you still qualify even though the rate is higher, you will be required to close. TB has a reputation of wining arbitration cases and keeping deposits as well as collecting legal fees in addition, so that road is really not a wise option. In the end, they build a fine home and their mortgage company is pretty much as good as any other so you will get the best possible rate. Congratulations on your decision - you will almost certainly look back in time and conclude it was a great decision! This really is an excellent time to buy.
0 votes
James Wheeler, , Tampa, FL
Sat Sep 27, 2008
Hi Phil. Virtually anyone who offers "regular" conforming loans also offers the temporary conforming jumbo loans... Bear in mind, however, that use of the temporary conforming jumbo limits comes with strings attached - stricter rules and higher rates. Very few borrowers are actually using them. The vast majority of jumbo loans are being written as 5 yr ARMs or not at all... Another important consideration, if you really want a conforming jumbo, is the location of the subject property. Will this new home be located in in Loudoun County (in the DC metro area)? The temporary conforming jumbo loan limits are *not* uniform. They vary from county to county, based on area median home prices, like FHA loan limits. In Florida, for instance, the only county that temporarily has the maximum limit of $729,750 is Monroe (Key West). In Virginia, the counties that have that max limit are all in the DC metro area... It may be "easier" to use builder financing, but not necessarily better. You're not as likely to get the widest range of options and the best advice, and in the end, it could well be more expensive, despite appearances to the contrary. There are many variables in any purchase, and especially in new construction. When the seller also arranges your financing, you've just compromised what is otherwise a powerful safeguard for you as the buyer. Scrutinizing the transaction and the collateral protects the lender, of course, but it also protects you as the buyer / borrower. The lender reviews the purchase contract, orders and reviews the appraisal, orders and reviews the title work, etc. When the lender is an affiliate of the builder selling you the home, do you really think it's the same? Toll Brothers is a premier builder, but you can imagine that the very real people involved in selling their homes have very cozy relationships with the very real people involved in originating their mortgages. Your Toll Brothers mortgage specialist is going to care a lot more about Toll Brothers and the folks he or she works with everyday, than about you. Instead of seeking to build a long-term relationship with you by watching out for you and impressing you with great service and results, their natural inclination will be to preserve and protect the long-term relationships they already have.
1 vote
Lori Jeltema, Agent, Suffolk, VA
Sat Sep 27, 2008
Did you consider a contruction perm loan?
0 votes
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