Builder Financing: To Use Or Not To Use

Every builder is offering them.  It is either the cherry on the cake or the deal that draws you in. 

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The major incentive that most builders are currently offering is to cover your closing costs.  This sounds great since you otherwise have to pay it out of your own pocket.  It is never included in the ASKING PRICE.   Oh really?  Yep, it sucks but thats the way it is. 

 So, the builder says, “Don’t worry about them, we will cover them.”  Everyone is happy until you realize that you have to use their lender and their title company to get the incentives.  But you already have your own lender.  You even came in with your own lender lender (well, if you knew it would help you would- maybe next time).

The Problem

1.  Their lender is going to most likely charge you a discount point costing you to loose a lot of the money they just gave you.  So, instead of $10,000 for incentives, its more like $5000.  Will they change their mind?  Maybe, maybe not because they are still giving you money you wouldn’t get if you use someone else.

2.  Their rate stinks… Not always the case but for some reason the rate you get after the discounted point is still more than the rate your lender offered you when didn’t pay a point.  Strike two.

3.  Some times there are addition incentives like a finished basement or extra money to buy upgrades that are also tied to the lending and using a certain title company. 

This makes it a really tough choice.  Most people usually end up gritting their teeth and going forward because they can’t stand feeling like they are loosing otherwise.

babyeyes.jpgNow… before I paint too ugly of a picture about builders (I love builders) and their lenders know that they are not all sticklers.  Some builders have stopped requiring you to use their lenders and will still offer the incentives.  How nice. 

Here are a few tips when writing a new construction contract:

1.  Use a Realtor (I know a good one). 

For those of you do-it-alone-rs it is VERY ODD that you are scared to use a Realtor when BUYING a home.  There are no fee’s for you (unless your Realtor charges them on top of what they get paid?).  The builder will pay them and it won’t cost you any money.  And NO… you won’t get a discount for not using a Realtor because they love all the business that us Realtor’s bring them and don’t want to kill the relationship.  You might realize that they can  SAVE you a lot of MONEY.

2.  Go in with a LENDER APPROVAL LETTER (this is different from a pre-approval letter).

When negotiating a deal the question in the back of the Sales Reps mind is, “I wonder if these guys even have the money or credit to buy this.”  This will show them that you are serious and will demand their full attention. 

3.  Make Your Deal Contingent

**  In other words, tell them… Hey, I want your house and as you can see I am qualified to buy it.  However, for this deal to work I am going to use MY current lender and I still want all of the incentives you are offering.  **

This does not always work but you stand a good chance with a lender letter in your hand.  The sales rep most likely can’t make the decision so they will present it to their boss and get you an answer.

 4.  Pray

It always helps.

If you are interested with finding out about more new construction deals in the area contact me.  I have the scoup on Ashburn New Construction that will help you. 

100% Financing Going Away?

With the continuation of lending restrictions being tightened FANNIE MAE  (Federal National Mortgage Association- the guys that buy a lot of the mortgages and set most of the lending guidelines) has once again made it a little more difficult for some to grasp the goal of home ownership this time around. 

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Their goal is not to be a jerk but to help fix the mess that we are in… I hope.  They are in the process of judging markets accross the United States and deciding if they are considered Declining or NOT.  Just for your information,  Loudoun and Fairfax have been flagged as DECLININGYikes.  Well, lets be honest, we all knew this. 

Fannie Mae does not buy loans over the conforming limit being $417,000.  This does not mean that they will not provide financing for homes in a declining market.  It only means that they will not provide ONE HUNDRED PERCENT for homes in a declining market.  Most lenders will now require 5% down. 

*GOOD NEWS*  There are still some 100% programs out there.  Some lenders will finance them, some will not.  And I am not talking about Shady Loans, though some may be.  I can refer you to some great lenders in the area who shouldn’t go belly up tomorrow.

Some buyers may also want to consider FHA loans which have tight restrictions but will allow 3% down and will work with rough credit. 

For more information about this issue which we have yet to see play out check out this Fannie Mae site HERE.

Lets pray that this will help in the long run, but I fear that the issue isn’t as much current buyers put previous buyers with bad loans. 

SORRY–  Forgive mis-spellings or typos.  Let me know if you find any.

DO YOU THINK THIS WILL HELP OR HURT?