1. You become the backup offer. I did loans for three different customers in 2017 where they had tried to go through the builder’s mortgage company. Everything was going great until it came down to a month or so before closing and the mortgage company denied their loan and then sold the home to another borrower at an increased profit. On one of these, the borrower had to get an attorney to get back her $10,000 in earnest money that the builder was trying to keep (due to the denial). The builder’s mortgage company is only there to increase the profit of the builder. If they can increase the builder’s profit by denying the loan so the home can be sold to someone else at a greater price then so be it.
2. Any incentive given to you to go through the builder’s mortgage company can be negotiated for ANY mortgage company (buyers simply don’t know this and realtors don’t really care). Also, any incentive given by the builder is going to be eaten up by the mortgage company’s closing costs (they do this on purpose). So in other words, if the builder gives you $5k in concessions to use their lender, then at closing there will magically be a minimum of $5k in fees charged to you by the mortgage company.
3. You are guaranteed to be baited-and-switched. Every builder’s mortgage company sends out RESPA (loan docs) at the very beginning of the process and then dares the borrower to find a better offer; which cannot be found because the mortgage company under-disclosed the rate by half of a percentage point from market. Their loan documents expire long before the home is completed (mine will as well, but at least I’m pointing this out to you), so they know they can put anything on paper they want. Somewhere between 6 days and 2 weeks before closing, the mortgage company will arbitrarily lock in the interest rate and send out new loan documents which will give the borrower sticker shock. Now the rate isn’t .5% less than everyone else’s it is .5% greater than everyone else’s. Why do they wait so long? They wait until the last minute to keep you from shopping. The builder builds into the contract a penalty of $200-$300 per day for each day the loan doesn’t close due to you going with a different lender. I had 2 different borrowers come back to me in 2015 begging for me to do their loans (they didn’t take my upfront advice) and I told them simply that they were stuck because there wasn’t a way to get it done in the 6+ remaining days they had left.
4. There are very few builder mortgage companies that do any refinancing at all, this tells you everything you need to know. Sixty-five of my customers last year were either previous customers or were referrals from other customers. A builder’s mortgage company knows that once they wipe the floor with you at the closing table, you won’t ever bother to come back so they aren’t even set up to handle you if you do.
Whether you do business with me or not, you should stay away from a builder’s mortgage company (any builder) and go with a wholesale lender (there aren’t many, but there are a few). I will be less expensive at closing (not at initial, because I’m not willing to lie to you) than any builder’s mortgage company.
In today’s real estate marketplace, you need an expert mortgage company. Southwest Funding is that company. We have been serving the needs of our clients since 1993 and we have an A+ rating from the Better Business Bureau. We are a Direct Full Eagle Mortgage Lender and are fully authorized to fund VA, FHA, USDA, HECM (reverse), Fannie Mae, and Freddie Mac loans.
THE FOLLOWING ARE A LIST OF ITEMS TO KEEP IN MIND FOR YOUR NEXT HOME PURCHASE:
1. Purchase borrowers are the most likely to be taken advantage of in a transaction by some bait-and-switch lenders because the borrower is on a deadline.
a. Make sure you get ALL quotes in writing! Nothing else matters. Too many times we have seen borrowers get a quote from another lender only to be switched right before closing and by that time it is too late to do anything about it.
b. Make sure your loan has been seen by an underwriter BEFORE you sign a contract. Most lenders give you a preapproval that is worthless, it just means the originator thinks he can get the loan done. Only underwriters can truly determine your eligibility for a purchase. Southwest Funding is one of the few lenders which allow you to have your documents reviewed by an underwriter without a contract.
2. Make sure you FULLY disclose how you receive your income. Bonuses, commissions, and overtime, are all calculated differently and are not part of your base income. Some lenders won’t even allow you to use this income so you won’t find out until the very end that your preapproval is now a denial.
3. Getting the cheapest price for a home is not always the best thing. Sometimes it is getting a good price with the most seller’s concessions you can so you lower the amount of cash you need to bring to closing.
4. Understand you will have unforeseen costs of owning a home. Lawn maintenance, new furniture, and updates are just a few things to keep in mind when budgeting.
5. Make sure the property taxes on the home you are purchasing are based upon your age and the actual improved value of the home. All too often, we see borrowers who closed their loan somewhere else and come to us to refinance because their payments shot up due to a shortage in their escrow account.
6. Have fun! Purchasing a home should be exciting not dreadful.