Wednesday, March 18, 2009
Beware Builders Offering "Financing"
If something seems too good to be true - it probably is!!! Interest rates at "below market rates" by homebuilders but ONLY if you use "their" lender. HUD sure doesn't like these sweetheart deals....
A homebuyer should be free to choose their own lender. The internet has levelled the playing field for lenders. A buyer can shop rates and loan fee packages. ALWAYS make sure you are comparing apples to apples. Lenders can call their fees anything they want - Origination, Discount, Processing, Underwriting, Document Preparation, etc. Doesn't matter to the Buyer - just find out what the total fees are for a loan at a certain rate and then compare.
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Builders with their own financing companies seem to sell homes based more on low rates and payments, rather than on true craftsmanship and true market value. A homebuyer can end paying tens of thousands more for a home in exchange for a very low interest rate provided by the builder. The low interest rate may only save them a couple of hundred dollars per month and it could take 10 years to recoup the additional monies spent for the home. These programs do create more homeowners, but at what cost? When entire communities are built and sold with below market rates it artificially inflates homevalues, leaving the homeowners upside down, with little equity, no equity, or even negative equity. As a result, now the homeowner can not sell their house, so they walk away from it because they have little or nothing vested. A cycle is created that is devasting to homeownership across a much broader region and contributes to a housing crisis like we are seeing now. So do builders with their own finance companies really promote homeownership? Not for very long!
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