Homebuyers Need to Check Builder's Incentives

By Sheryl Landrum
Home Worth Columnist

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In a slow home selling market, home buyers are often happy to hear that a builder will offer them financial incentives to use the builder's lender for their new home loan. Before you sign on the dotted line, however, here is what you need to consider.

Builder's incentives can sound very attractive when buying a new home but how do they play out? Too often, as a lender, I see money incentives given by the builder to a new home buyer that end up being paid out to the lender when the home loan is completed. Home buyers end up using the builder's money credit to buy down their mortgage interest rate and the money ends up in the lender's pocket. What I see as an outside lender is an interest rate and mortgage points paid that are much higher than the market interest rate. In effect, the new home buyer can spend more money by using the home builder's mortgage loan company then if they had shopped around for a lender for their home financing.

If you are looking at buying a new home and the developer offers you monetary incentives to purchase it, and to use their lender, ask him if they are willing to meet, or match, a competitive home loan from an outside source. This way you can ensure you are getting the best home loan for the best price when purchasing your new home.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage of San Diego at the Prudential Realty Office in Bonsall, California.