Should You Use the Builder’s Preferred Lender?

By Steven J. Thomas | Refind Realty

Hi, I’m Steven Thomas. If you’re buying a new construction home in Dallas or anywhere in the DFW area, chances are the builder is going to offer you a special deal if you use their “preferred lender.”

It’s a common question I get from clients: Should I use the builder’s lender or shop around?

Let’s break it down so you can make the best decision for your bottom line.

What Is a Builder’s Preferred Lender?

A builder’s preferred lender is a mortgage company the builder has a business relationship with. They often work together to streamline the loan and closing process for new construction buyers.

Builders often advertise things like:

• Thousands in closing cost credits

• “Special” interest rates

• Design center incentives

But should you automatically say yes?

Benefits of Using the Builder’s Lender

1. Closing Cost Incentives

This is the most common reason buyers go with the builder’s lender. You might get:

• $5,000 to $15,000 in paid closing costs

• Rate buydown credits

• Paid title fees

Just remember, these incentives often come only if you use their lender.

2. Faster Communication Between Lender and Builder

The preferred lender usually has a direct line to the builder’s team. That can mean fewer delays and smoother scheduling for:

• Appraisals

• Construction progress updates

• Final walk-through coordination

• On-time closings

3. Rate Lock Programs

Some builders offer extended rate lock options through their preferred lender, giving you protection if you’re buying a to-be-built home with a 6 to 12 month build time.

Potential Downsides to Watch For

1. You Might Not Get the Best Interest Rate

Incentives can look appealing, but don’t forget to compare the actual loan terms. The builder’s lender might offer you $10,000 toward closing, but charge a higher interest rate over 30 years.

Sometimes you’re better off taking a lower rate with an outside lender and covering more of the closing costs yourself.

2. Limited Loan Products

Preferred lenders may push specific programs that benefit the builder, but they might not be the best fit for you, especially if:

• You’re self-employed

• Using down payment assistance

• Needing a jumbo loan

• Buying with unconventional income

3. You Lose Leverage if You Don’t Shop Around

If you accept the first loan offer you get, you won’t know if it’s competitive. When I represent you, I always suggest getting at least one quote from an outside lender.

This gives you more negotiating power — and sometimes the builder’s lender will match or beat a better deal.

What I Tell My Clients

I always recommend comparing your loan options.

Here’s how we do it:

1. Get a quote from the builder’s lender.

2. Get a second quote from a local lender you trust.

3. Compare the monthly payment, interest rate, APR, and total costs over 5 and 30 years.

Sometimes the builder’s lender really is the best option. But not always. You won’t know unless you compare.

Want help reviewing your quotes? I do this for every new construction client.

FAQs: Builder’s Lenders and Incentives

Will I lose the builder incentives if I don’t use their lender?
Usually yes, but you may be able to negotiate some credits with your own lender. I can help with that.

Can I use the builder’s lender just to qualify, then switch later?
Yes, but timing is key. You’ll want to make the switch early enough in the process to avoid delays or deposit issues.

Are builder rates higher than market rates?
Sometimes. That’s why you should always compare offers.

Does using the preferred lender speed up closing?
It can. They’re often integrated into the builder’s schedule and systems.

Can the builder force me to use their lender?
No. By law, you have the right to choose your lender. Incentives are allowed, but mandatory use is not.

Steven’s Final Take

Don’t assume the builder’s lender is the best or worst choice. Use the incentive offer as a starting point — but compare all your options.

When you work with me, I’ll help you break it down and decide what makes sense for you financially.

Download the Lone Star App here: https://lonestarliving.hsidx.com/@sthomas
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