Locked in at 7.25% with 0.375 discount points, costing $2300. Builder’s lender gave me a $30,000 seller credit. My credit score is over 780, and I’m putting 20% down on a conventional loan. Initially, I thought I was getting a better deal based on their worksheets, but the rates shown didn’t clarify how many points were being paid for the lower rates. Now I feel like the $30,000 credit isn’t as helpful as I thought. If I had known their base rates were 7.5%, I might have reconsidered.
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
You could use that $30k seller credit to temporarily buy down your rate and refinance soon. Most unused funds go toward the principal if you refinance quickly.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
Not all builders are like this. My builder offered me a great rate without points and covered all closing costs with their lender.
@Aki
They probably adjusted the price of the home to cover that. Builders rarely lose money.
@Aki
That was my experience too. My builder’s lender gave me a competitive rate at 4.75% with no buy-down.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
Rates are high across the board right now. At least you got some credits to offset the cost.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
The builder probably made money on the deal elsewhere, maybe half a point or more.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
Never been forced to use a builder’s lender. I always shop around.
Sky said:
Builders often push their own lenders by offering big credits, but they charge higher rates. You can always refinance later.
Don’t forget they often use their own appraisers, which can lead to questionable valuations.
You could refinance after closing, maybe within six months, and potentially save on your rate.
Sam said:
You could refinance after closing, maybe within six months, and potentially save on your rate.
That’s true, though some lenders might face penalties for early refinances.
Sam said:
You could refinance after closing, maybe within six months, and potentially save on your rate.
That’s true, though some lenders might face penalties for early refinances.
Builder lenders don’t usually penalize loan officers for early payoffs. It’s more of a business decision for them. If you got a great deal, you wouldn’t need to refinance, so it’s fair game to do so.
Sam said:
You could refinance after closing, maybe within six months, and potentially save on your rate.
That’s true, though some lenders might face penalties for early refinances.
Why would refinancing be considered malicious?
@Ashton
It’s seen as malicious because it can hurt the lender financially. They might lose their commission, and depending on agreements, they might owe money back. It’s not always intentional, but some borrowers refinance purely out of spite if they feel wronged.
Take the credits, even with the higher rate, and refinance as soon as you can. The credits can cover your upfront costs.
Gale said:
Take the credits, even with the higher rate, and refinance as soon as you can. The credits can cover your upfront costs.
Not all credits get refunded when you refinance. Also, choosing FHA just for a rate could be a mistake if you have a 780+ credit score.
7.25% is quite high. Can you shop around, or do you lose the seller credit if you don’t use their lender?
Rian said:
7.25% is quite high. Can you shop around, or do you lose the seller credit if you don’t use their lender?
That’s the catch with builder credits. They tie you to their lender while marking up the home price to cover it.
You should consider using the seller credit for a 2-1 temporary rate buy-down.