The real estate industry does a decent job educating first-time homebuyers. There’s so much valuable information out there that no buyer should go through the process uninformed.
Buying a home in a new community – a brand-new home that no-one has ever lived in – is like first-time homebuying on steroids. There is a ton of things to consider and, unfortunately, the builders sales representative is not always the best source of information and advice for the home buyer … after all, the sales representative represents the builder NOT the Buyer.
From the home loan process to the design center … from title insurance to choosing an agent … it doesn’t need to be confusing.
Read on to learn answers to the two most common questions I receive from clients who are considering buying a new construction home.
The preferred lender
Many home shoppers walk away from the model home tour under the assumption that they must use the builder’s preferred lender as a condition of the purchase.
Is it any wonder?
Builders’ sales representatives have been known to give this impression
And this is absolutely not the case.
The builder may require you to obtain loan pre-qualification from their preferred lender, but you can ultimately borrow money from whichever lender you choose.
The builders preferred lender often offers what appears to be a really good deal. The builder and their lender may offer to pay your closing costs or offer “cash at closing,” if you obtain your home loan through them.
Builders may reduce the price of the home or throw in attractive upgrades as an enticement to use their preferred lender.
You really need to compare how the builders lender stacks up against other local lenders. What appears to be a great deal may not be so great. Compare apples to apples and do the math. Their offer to pay closing costs or reduce the purchase price may be offset by higher closing costs, higher interest rate, or additional up front points.
Incentives may turn out to mean nothing if not compared against other terms, such as the interest rate and points charged
By the way, go ahead and allow the builder’s preferred lender to pre-qualify you for the loan – you are in no way obligated to use their services in exchange for loan pre-approval. And don’t worry that shopping other places for a loan will hurt your credit. Sure, any credit inquiry may result in lowering your score several points, but within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry.
You’ll be given a Loan Estimate that you can use to compare this lender’s offering against others. The Consumer Financial Protection Bureau offers a sample of the form, with explanations, on its website.
My best advice is to go loan shopping before you step one foot into a new home community’s sales office. Have facts and figures in-hand, ready to compare to the builder’s lender.
If you don’t have this info in hand, there’s a fair chance you don’t get the best deal.
With offers from other lenders, you’ll be able to make a fully informed financial decision.
About the builder’s sales agent
Just as it’s not a good idea to use a private Sellers real estate agent when buying an existing home, the builder’s sales agent may not be the best choice. Here’s why:
The owner’s agent, whether homeowner or builder, has one overriding aim: get the owner the best deal possible … in other words, the most $$
The Buyer’s agent, on the other hand, is primarily concerned with keeping the Buyers interest as top priority. Regardless of how congenial, knowledgeable and eager the builder’s agent is, you need your own representation.
You’ll be asked on your first visit to a model home if you are working with a real estate agent and your answer should always be “yes”
I recommend you ask your agent to accompany you on the first visit to a builder model. If that isn’t possible, register your agent when you sign in.
Now, instead of using an agent whose loyalty is with the Seller (builder), you have your own representation. Someone who has your best interest as top priority. Someone to guide you through the transaction from start to closing. And guess what…there is absolutely no charge to the Buyer. So nothing to lose but a lot to gain buy choosing an agent to help you through the process.
The above post “Do I Have to Use the Builder’s Lender and Sales Agent (only)?” was provided by Kevin Guerrero of Keller Williams Clients’ Choice Realty. To find out more about Kevin and Keller Williams check out the ABOUT US page. You can check out my Zillow Reviews too. To get a complimentary home valuation click HERE.
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