Working With Your Builder's Preferred Lender

When it’s time to purchase a home, exploring different mortgage loan options is a must. Shopping around for different lenders, interest rates, and mortgages can make a big difference in the long run. But what about the lender your homebuilder recommends? Is it worth considering this lender over others?

In this article, we’ll explore preferred lenders in detail: What are they, why do homebuilders work with them, and how financing with one could potentially lead to better mortgage terms. Keep reading to learn the answers to these questions and more.

What is a Preferred Lender?

A preferred mortgage lender is a lender that has an established affiliation with specific homebuilders, real estate agents, or other partners—often operating as a separate entity within the builder’s parent organization.

Preferred lenders can be direct lenders, mortgage companies, mortgage brokers, credit unions, or other financial institutions. These lenders are often familiar with the ins and outs of new construction loans and their partner’s closing procedures, potentially making the mortgage process smoother for the borrower.

In some cases, preferred lenders offer attractive perks, such as competitive interest rates, reduced closing fees, or other financial incentives designed to make the homebuying process simpler.

Why Do Homebuilders Partner With Mortgage Lenders?

There are many reasons why homebuilders partner with specific mortgage lenders. Here’s an overview of a few of these reasons:

• Trust and familiarity: When builders work with a preferred lender, they create a working relationship built on trust, familiarity, and mutual understanding.
  
  
• New construction expertise: Preferred lenders who partner with homebuilders may be experts in the nuances of financing a new home.
  
  
• Streamlined processes: Preferred lenders are familiar with a homebuilder’s projects and timelines, reducing the risks of delays and inefficiencies.
  
  
• Buyer convenience: By offering a preferred lender, homebuilders can improve the closing experience for buyers.
  
  
• Buyer incentives: Preferred lenders sometimes offer special perks, such as reduced closing fees and better mortgage rates.

Potential Benefits of Using Your Builder’s Lender

Working with your builder’s preferred lender can offer unique advantages, from exclusive financial perks to a more streamlined homebuying experience.

While there are some considerations to remember, understanding the potential benefits can help you decide if this option is a good idea based on your needs. Let’s explore:

• Special perks: While not guaranteed, financing through the builder's lender can potentially unlock perks like discounted interest rates or credits toward closing costs.
  
  
• Increased approval chances: Preferred lenders may cater to a broader range of buyers, including those with limited credit history, which may increase the likelihood of loan approval for first-time buyers.
  
  
• Flexible rate locks: Construction delays happen, but builder-backed lenders might offer extended rate-lock options to protect buyers from fluctuating interest rates during the building process and account for potential delays.

How to Decide if You Should Use Your Builder’s Lender

Deciding whether to use your builder’s preferred lender is a significant step in the home loan process. While the potential perks and streamlined lending process might seem appealing, it’s essential to carefully evaluate your options to ensure you’re making the best financial decision for your situation.

By comparing offers and understanding the details, you can confidently determine whether this option aligns with your goals.

Here’s a step-by-step guide to help you make the right choice:

1. Compare loan offers: Gather quotes from the builder’s preferred lender and at least two or three other lenders. Compare interest rates, fees, and terms to find the right lender.
   
   
2. Evaluate incentives: Look closely at any perks the preferred lender offers, such as closing cost credits or rate discounts.
   
   
3. Understand the fine print: Ask detailed questions about rate locks, additional fees, and whether the incentives depend on specific conditions like credit score, down payment size, or contracting on select homes.
   
   
4. Consider timing: If the home is still under construction, check whether the lender offers flexibility for rate locks or delayed timelines, which could save money and provide additional peace of mind.
   
   
5. Assess your comfort level: Consider how well the lender communicates and whether they seem transparent and buyer-focused. Feeling confident in your lender is also important in addition to finding the best deal.
   
   
6. Consult an expert: If the decision feels overwhelming, consider seeking advice from a financial advisor to help weigh your options objectively.

Using a Preferred Lender to Finance Your New Construction Home

Working with your builder’s preferred lender might simplify the homebuying process while potentially unlocking exclusive financial perks. By carefully evaluating your options and considering how a preferred lender fits your goals, you can confidently decide if it’s the right choice to finance your new home.

At Century Communities, our trusted lender shares our commitment to helping buyers achieve their homeownership dreams—offering tailored financing solutions with a seamless and streamlined process.

“While affordability is always a key factor, the increase in homebuyers choosing Inspire Home Loans isn’t just about competitive rates—it’s about the confidence that comes from a streamlined and transparent financing process that puts our customers first."

 

Preferred Lenders FAQ

Can my builder require me to use its preferred lender?

No, your builder cannot require you to use any lender. Your builder can recommend a preferred lender, but the Real Estate Settlement Procedures Act (RESPA) prevents builders and other businesses from forcing buyers to finance with a specific mortgage company.

What credit score do lenders prefer?

FICO credit scores are commonly used by lenders. If you’re purchasing a home, the better your credit score is, the better your interest rate will typically be. Credit score requirements can differ by lender, but for a general FICO score range, financing options can begin with a credit score as low as 580, while credit scores between 620–669 are considered acceptable or fair, scores between 670–739 are considered good, and scores over 740 are considered very good to exceptional.

What are builder incentives?

Builder incentives are promotional discounts homebuilders and their preferred lenders might offer to buyers. For example, if a buyer is offered $10,000 off for working with a specific lender, then a $350,000 home could effectively cost $340,000 before closing fees.