Builders Steering Home Buyers To Preferred Lenders (1)

Builders Steering Home Buyers To Preferred Lenders

Gustan Cho Associates are mortgage brokers licensed in 48 states

This ARTICLE Is About Builders Steering Home Buyers To Preferred Lenders

Using Gustan Cho Associates over a preferred lender:

Gustan Cho Associates are highly interested in earning your business with competitive interest rates and outstanding customer service. Your realtor may be reluctant to use their preferred lender. Or if you are in the process of building a home, the builder will try to nudge you in the direction of using their preferred lender. Often times offering incentives to use their lender. In this blog, we will detail the ins and outs of using Gustan Cho Associates versus a preferred lender. In this article, we will discuss and cover Builders Steering Home Buyers To Preferred Lenders.

Builders Steering Home Buyers To Preferred Lenders Versus Choosing Your Own Lender

Since we are not familiar with the preferred lenders, we can only tell you more about our loan products. Gustan Cho Associates offers a full slate of mortgage products with zero LENDER OVERLAYS. We do not add any additional qualifications on any of our conventional, FHA, VA mortgages like most lenders do. This can open up the door to homeownership for more borrowers. Lender overlays are additional guidelines put on by a bank or lender to fit their specific criteria. For example, many builder’s lenders will tell you to need a 620-credit score or above to qualify for an FHA mortgage. This is not the case, you can qualify with a 500-credit score for an FHA mortgage. Credit scores between 500 and 579 require a 10% down payment. Borrowers with credit scores over 580 and above only require a 3.5% down payment. This is information that the builder’s lender may not tell you because they have an overlay and want you to select them as your lender.

Types Of Relationships Builders Have With Preferred Lenders

It is important to understand that these preferred lenders usually have some sort of relationship associated with them. Most of the time, the builder’s lender is owned by the builder themselves increasing profits on the overall sale. In other cases, your realtor may suggest a lender because they have a good working relationship and no financial ties. Let’s explore this further.

Incentives Offered By Preferred Lenders

In some cases, incentives may be offered by the builder, but you may run into overlays trying to close your transaction. When taking their advice and utilizing the preferred lender, you do not get a second set of eyes looking over your mortgage. It is important to make sure you are getting the best mortgage possible which can include shopping around for the best available loan product. Most importantly selecting a lender who can get your mortgage to the closing table.

Builders Steering Home Buyers To Preferred Lenders: Steering

Builder’s lender:

Mortgage steering laws are as prevalent as they have been in the industry. Mortgage steering refers to an interested party such as a realtor or builder pointing you in a certain direction to utilize a certain lender. This is a predatory lending practice that can cause conflicts of interest when the interested parties have financial obligations with each other. Wow, it is 100% legal to utilize a builder’s lender, there are times where you can be paying a higher price to do so. Please see the Federal Trade Commission RULE NO. R911004 ruling showing how these deceptive practices can occur.

Business Affiliation And Potential Conflicts Of Interest

If there is ownership interest with the seller and the lender, the seller is required to disclose the business affiliation. Even with this disclosure, many Americans choose to stay with that lender because they feel the deal may be too good to miss. As a builder, you cannot require that a buyer utilize their lender and they cannot charge you a higher interest rate for using that lender, but they may offer incentives such as closing cost credit which are only available through that lender. If the deal seems too good to be true, you may want to get a second opinion from a lender who does not have financial ties to the builder.

How Gustan Cho Associates Saves The Day With Preferred Lenders Mortgage Denials

In the past, we have had many borrowers apply at Gustan Cho Associates who have been pre-approved by the builder’s lender only for the financing to fall through. If the builder’s lender cannot get your mortgage closed, they will often continue to offer the same incentives to utilize a lender who can get the loan closed. They would rather get the house out of their inventory than wait for somebody else to buy it. Do not be afraid to tell your builder you are going to find your own mortgage financing. You are not obligated to utilize their lender. For more information on this process, please call Mike Gracz at (800) 900-8569 or send an email to

Builders Steering Home Buyers To Preferred Lenders And Reasons Why They Steer

How Gustan Cho Associates Saves The Day With Preferred Lenders Mortgage Denials

Most real estate agents will have a working relationship with a specific mortgage company or a specific loan officer. They may ask you to utilize them only because they are familiar with their process. There are other times when the real estate agent may actually be a licensed loan officer themselves. Depending on the loan program, they may represent both sides of the transaction. Meaning they may be your realtor and your loan officer. If this is the case, this information must be disclosed to you with your loan documentation package. There are strict RESPA RULES that cannot be violated. We have a few license Realtors on our team at Gustan Cho Associates. This is a great way to buy a home when utilizing a conventional mortgage. Your real estate agent will be able to answer mortgage-related questions on the spot, such as questions regarding interest rate and closing costs. Without an active NMLS license in your state, specific questions on rates and fees cannot be addressed. If your licensed realtor is also a licensed loan officer, then these questions can be answered.

Choosing A Lender With No Overlays With Experience

I’m sure you have heard the term “follow the money”, the same is true for mortgage lending. If you feel the preferred lender is being pushy, it is more than likely time to get a second opinion. Gustan Cho Associates Mortgage Group is determined to offer competitive mortgage products to help our clients buy and refinance their homes. We encourage you to check out our reviews, we are experts and getting your loan to the finish line. As stated above, if the builder’s lender is threatening to take away incentives if you use an outside lender, give them some push back. From my experience, most builder’s lenders do have mortgage overlays, which may stand in your way. If they are unable to close the loan for you, the incentive should rollover. For more information please call Mike Gracz on (800) 900-8569. Subscribe to our YouTube CHANNEL to stay up to date with the Team at Gustan Cho Associates!

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