Now that you’re ready to buy a new home, you’ll want to shop around for the best mortgage rates and offers from a variety of different lenders - including your builder’s. Because most builders have mutually beneficial relationships with the lenders they recommend, there are numerous perks available to you as a new home buyer.
Here are few reasons why your builder’s preferred lender might be the best choice:
1. A Locked-In Interest Rate
Your interest rate has a significant impact on your monthly payment. In most cases, whenever you request a fixed-rate mortgage, the loan provider locks in an amount for a specific period.
With standard lenders, this period ranges from around one to two months. And while that’s sufficient time if you're moving into an already-finished home, it's not much time at all if your home still has to be constructed.
Working with your builder's lender is actually better in this case as they can secure your mortgage interest rate for a longer time period - a full year in certain situations. Additionally, once you're ready to confirm your mortgage and occupy your new home, they can compare existing interest rates and implement the cheapest rate if there have been any fluctuations.
2. An Easier Pre-Approval
With regards to developing neighbourhoods, many loan providers are hesitant to approve mortgages due to the difficulty in appraising new homes in new Edmonton communities. That's understandable since there are very few (if any) other properties to compare against to get an idea of the home's actual value.
Your builder's lender, however, will have no qualms about appraising your new house at full value. They're already familiar with the quality of the builder's work, the neighbourhood's value, and can give self-assured mortgage appraisals, whether there are other properties to compare with or not. They’re also able to anticipate the future worth of your home, confident it will increase in value as new community amenities crop up.
3. A Faster Process
Buying a new home differs from buying a resale. If you're building your home from the ground up, money must be deposited at certain points during construction.
A key benefit to working with a preferred lender is their familiarity with the procedure and your developer's time schedule. They will have any required forms handy and will be prepared to make deposits during every phase of the build.
Builder-recommended lenders tend to have faster response times as well, and will even answer questions at night and on weekends so the mortgage approval process moves quickly. They also use property appraisers who have experience with the builder's properties and know their standard assessment values. If you go with a creditor who’s unfamiliar with the calibre of the builder's work, the process is likely to take longer.
4. Flexible Down Payment Options
If you'd like to sell your old house before you buy your new one, builder-recommended lenders can streamline this procedure. For example, you can get a loan on your present property and use it as a deposit, while continuing to stay there until your new home is completed. When that time comes, you'll be able to sell your old house and pay off the loan with the proceeds.
5. Potential Savings
It's no big secret that there are a few new home costs that come with closing on a mortgage. These charges must be paid in advance when the contract is signed. However, most builders will forgo the legal costs involved with mortgages when working with the lender they prefer, which can easily save you a couple thousand dollars in closing costs.
These are the key advantages of using your builder's lender. Remember, builders generally don't profit financially from you using their preferred lender; they recommend them because they're easy to deal with and are able to initiate fast, hassle-free closings for homeowners. Most of the time, a preferred lender's rates can be compared to those offered by other institutions, and the ease of dealing with these creditors can outweigh any modest savings gleaned from using other providers.
In short, no matter how dead-set you are on using a certain mortgage provider, it’s a good idea to at least check out what your builder's preferred lender has to offer. You could be enjoying a much faster, easier, and possibly cheaper mortgage process as a result.