Are there drawbacks to using builder's financing?

Asked by Rachel Dammann, Westminster, CO Sat Aug 13, 2011

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Margaret Has…, Agent, Tampa, FL
Sun Aug 14, 2011
The builder usually has a "preferred lender". Having worked for builders for many years, I can say you will always get the best deal using the builder's lender if the builder is paying the closing costs. A builder's rate may be 1/4 point higher than a bank's rate, but probably the same as a broker's rate. Shopping for rates is very tricky since rates change daily, but if the builder is paying closing costs, it's going to be the best deal. Many people don't realize that there are different rates for different credit scores or different loan programs, but they are all very similar no matter which lender is used.
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That is a complete lie, I have helped many clients who were also comparing with the builder. At the end they choose the lender over the builder, because the information was clear and they were getting a real better deal
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Mark C Munro, , Westminster, CO
Mon Aug 15, 2011
Builder is allowed to build 6 points into the price of the Home. Private financing from Builder's own Investors is unregulated to my understanding.
I have always felt the requirement to use the Builder's financing is very questionable!! No break for coming in with the Buyer's lender should not be penalized.
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Robert Schult, Agent, Sarasota, FL
Sun Aug 14, 2011
Many times the builder's financing is a better deal because they may contribute to closing costs and have other incentives. Best thing to do is compare their rate and contributions to the best mortgage deal that you can find in the open market.
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Dianne Hicks, Agent, Rancho Bernardo, CA
Sun Aug 14, 2011
Great answers already and it really depends on the who the builder uses. My last new home sale, they were compreable and then got get benefits going with the builders financing co so it was a no brainer... In the end... you really just have to analyze and figure out which is the better way to do.

Kindest Regards,
Dianne Hicks
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Daniel Fisher, Agent, Charlotte, NC
Sun Aug 14, 2011
We always shop a builder rate against a lender rate and compare APR's from the same type loans. Builder rates and fees are often higher. Generally, the builder wins if they are paying several thousand in Buyers closing costs if the Buyer uses their loan, but is not paying Buyer closing costs if the buyer uses their own lender. Closing costs are often higher if using builder financing. Every state is different, some prohibit certain builder incentives.
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Clark Riel, Agent, Reno, NV
Sat Aug 13, 2011
If the builder is using a preferred lender the terms may be beneficial for the buyer. Sometimes the rate can be bought down by the builder. I would look into it and compare it with other lenders before I made a decision.
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