Builder's Lender Wants to Start Mortgage Paperwork Early

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4th and Inches
Posts: 145
Joined: Mon Nov 12, 2012 8:53 pm

Builder's Lender Wants to Start Mortgage Paperwork Early

Post by 4th and Inches » Fri Jan 15, 2016 1:00 am

My wife and I are having a new home built. We went into contract back in October and the house will be done late this summer. We are and were well aware of the builders timeline due to it being a busy market and being able to get first right of refusal on our selected lot before the lots were officially released. We have 800 credit scores and have been pre-approved for more than we need for the house. One of the builder's preferred lenders provided us with the needed mortgage approval documentation. The incentive for using a preferred lender is quite small at just $3000, which we would get at closing if we use a preferred lender.

The mortgage banker I have been in contact with at the lender says that we need to start paperwork now even though there is no way the house will be done before August 1st. This seems really, really early and I think he just wants me to not shop around when we are getting closer to closing.

Is this what he is saying actually true or is he just trying to "get me off the street" and not shop around.

With new construction and already being pre-approved when should the process start?

When should I formally shop around for the final mortgage?

betterfinances
Posts: 530
Joined: Tue Dec 08, 2015 10:22 am

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by betterfinances » Fri Jan 15, 2016 1:10 am

I can tell you my story when I bought my new construction home. It was a decade ago and I don't know how much has changed.

We signed the paperwork to buy a house, wrote some checks to the builder directly, and then was told to go get approved through the builders preferred lender. Was told that we did not have to use them but had to get approved through them. Was offered $7000 credit to go with builders lender. Went ahead with them with the plan to change.

Later, when the house was getting close to finished, I let the builder know that we would be changing lenders. Was told "no way" because we missed the deadline. When I complained that the lender told us a different deadline, I was informed by the builder that the lady who told me that had been fired and that was misinformation.

We closed through the builder's lender and then refinanced soon after that with another lender.

thejuice03
Posts: 17
Joined: Thu Jun 04, 2015 12:57 am

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by thejuice03 » Fri Jan 15, 2016 1:22 am

He is trying to get you off the street. All of the documents you give him will be expired by August and you'll have to submit everything all over again.

BogleMe
Posts: 248
Joined: Sat Mar 13, 2010 8:10 pm

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by BogleMe » Fri Jan 15, 2016 7:06 am

So you are building for cash and obtaining a loan once construction is complete?

This is early, yes, but cut him some slack - the consumer regulations are a gargantuan nonsensical mess right now and he may just want to exclude himself from being the reason a future deal falls apart because he forgot to cite your race, or get you to sign some silly immaterial form, etc ...it is that bad.

I would rather this guy than the guy who asks for everything he needs the week before.

rkhusky
Posts: 4397
Joined: Thu Aug 18, 2011 8:09 pm

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by rkhusky » Fri Jan 15, 2016 8:09 am

Start looking around at rates and total cost for mortgage. If the lender is competitive, get a quote in writing with a lock for 1 year. Definitely don't sign anything that locks you in without also locking in terms of the mortgage.

Dulocracy
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Joined: Wed Feb 27, 2013 1:03 pm
Location: Atlanta, GA

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by Dulocracy » Fri Jan 15, 2016 10:44 am

rkhusky wrote:Start looking around at rates and total cost for mortgage. If the lender is competitive, get a quote in writing with a lock for 1 year. Definitely don't sign anything that locks you in without also locking in terms of the mortgage.


Ditto. Shop around now. Make your decision this month or early next month. Get the process started.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

4th and Inches
Posts: 145
Joined: Mon Nov 12, 2012 8:53 pm

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by 4th and Inches » Fri Jan 15, 2016 11:10 am

Thank you for the replies everyone. A few more follow-up questions:

So you guys feel that now is an appropriate time to actively search for a lender?
Should I also go through with hard credit checks?
Are there any issues with trying to get a rate lock this early in the process?

Thanks!

rkhusky
Posts: 4397
Joined: Thu Aug 18, 2011 8:09 pm

Re: Builder's Lender Wants to Start Mortgage Paperwork Early

Post by rkhusky » Fri Jan 15, 2016 12:17 pm

I don't think rate locks typically last that long - 60 days may be on the long side.

By looking now you will have a feel for the rates and costs in your area when it comes time to make a decision.

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