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(Possible) Pitfalls of using a “preferred lender” when buying a new home from a builder in Dallas

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Should you use the builder preferred lender when buying a new construction home from a builder?

If you are a new home buyer in the Dallas metro area and have been talking to builders like Toll Brothers, David Weekley, Highland Homes, Grand Homes, Shaddock Homes, Huntington Homes, Lennar, Impression Homes etc. to find your dream home, you have probably been informed about the “preferred lender” or the “in-house lender” by the builder. Sometimes builders or their lenders offer incentives to encourage you to use these “preferred lenders”. If you sign up with such a lender without completing due diligence, you may end up:

  • Paying much more in the mortgage interest rate and the associated fee for your home purchase.

  • Signing up for a loan program which is not the best option for you.

  • Paying up more for some services you can shop around for.

Always remember that "there is no free lunch"

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One of the common questions we get from our client is whether they should use the builder preferred lender. Here are some tips to help you with that decision to avoid pitfalls of using a builder’s preferred lender.

  1. Make sure that you get the incentives offered in writing before you take any decision.

  2. Always get estimates from at least 2 independent lenders in addition to estimate from the “preferred lender” and compare them apples to apples.

  3. Make sure that you understand any penalties that you might be liable to pay in case your closing is delayed because of the delays from the lender. Typically, in-house lenders or preferred lenders have less incentive to provide top-notch customer service and any delays on their side may cost you a few hundred dollars of penalty for every day the closing is delayed.

  4. Read reviews of all the lenders online and try to get some references. It is very difficult to change a lender once you are close to the closing date without moving out the closing date (which may result in penalties)

  5. There are instances when the builder’s preferred lender is the only choice you may have as a buyer. That’s when you are buying in a new development that doesn’t meet the requirements of most lenders. E.g. lenders often require that a new condo development be partially sold before they lend in a particular development. A normal lender may not lend to a new buyer with a building that is empty. In this case, your only option might be the “preferred lender”

  6. Make sure that your lender is following the RESPA laws when offering you incentives for using preferred lender.

Realtors add a lot of value to new home shopping experience

If you are getting ready to buy a new home, work with an expert realtor who is familiar with the new home builders and the new home buying process. Working with a professional can save you a lot of headache, time and money!

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About us:

If you are interested in relocating and moving to our great city of Dallas and need help finding a home, I would appreciate the opportunity to help you. A REALTOR with CRS & GRI designations - highest in the real estate industry - I have lived in Dallas metro area for over 15 years. Since many of my clients are relocation buyers, I have all the tools you need to help your home search. Whether it is video previews of homes, extended work hours, digital signatures for documents or more, I can make this process as comfortable as possible no matter where you are located.

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