BUILDER FINANCING PLANS vs. The Open Market 

Why you should always comparison shop the builder's offer...

Buyers of a newly built home have the POWER of the pen. It is a buyer's market for both the home and the new mortgage. First find the home you want to live in. Then negotiate your best sales price. Florida home builders are dealing in all sorts of ways to help move homes today...they need to sell houses like we need to make loans.

Reducing the price is one example. Many are adding various buyer incentives and options which give you more for your buying buck or reduces your out-of-pocket costs at closing.

Most builders offer "Special" financing packages. They usually offer a one-stop or packaged deal (this is usually what's special) from contract-to-closing if you use their approved lender. They may offer to pay a percentage of the loan amount or a given flat dollar maximum toward your closing costs they quote. The rate will probably be higher, it may also include an origination fee, but they do pay a part of the costs they quote to you.

Though not an absolute, expect a builder offer to apply generally only if you use their approved lender. The rate offered will typically be .375% to .50% (3/8 to ½%) +/- higher than a standard zero origination fee quote where you pay all your own costs. But, they do pay a given amount towards your closing costs if you take the higher rate. It's what is known as a Rate Buy-Up and most all companies,  including us, offer it. If you plan to only keep the loan 1 to 3 years, a Rate Buy-up may be a better choice rather than paying the higher closing costs at closing yourself, to get a lower rate. A lower rate may be less benefit in the short run. You have to compare it aginst your specific needs.

How does it work? If you close at the higher rate, the lender buying the closed loan will pay a mortgage company more to originate it and they, in turn, can pay up to a certain amount of the closing costs for you, because you took the higher rate. So, you pay for those costs over time through the higher interest rate selected. It can be an effective technique to lower the funds you need at closing and it's available on most transactions, builder or otherwise, purchase or refinance. But, higher rates can cost you more interest in the long run beyond the time it would take to recover the upfront costs. As stated above, a Rate Buy-Up may still be your better option if you are short on funds for closing or are planning to remain in the loan just a couple years. Helping you understand the "what and why's" is where we come in, along with trying to offer you a better final price.

Any company can offer you a "Rate Buy-Up". Don't take chances by not rate shopping at this stage. And, it's not necessarily any easier using the builder for your loan, but it can cost you less if you shop around. When you know you are within 60 days of closing (that's when you will normally lock a rate) it's time to Shop Rates and Fees. Don't wait until you're just days away, call early...give us time to help you. If a better price is not important to you at this stage, don't take an extra day to comparison shop.

Orlando Mortgage Masters can help.

Don't give up on your chance to save even more because you felt worn out by the buying process. Don't make financial "assumptions". Shop rate and fees when it's time to finalize your financing. It's a last opportunity to save even more. Call us!