Last Monday this blog discussed recent local builder incentives, and of course they are always based on using the builder's lender. The Washington Post this morning has a fairly decent article discussing the pros and cons of accepting the incentives with this criteria.
Builders can't force you to use any particular lender; federal law prohibits it. Nor can they dictate whom you must use for other settlement services, such as the title company or homeowner's insurance provider. (Lenders can choose who will perform the appraisal.)
Builders' incentives these days can be worth tens of thousands of dollars. Just last week, Fairfax-based Brookfield Homes mailed a flier to my home (or to the "current resident") touting as much as $100,000 in incentives on its single-family houses in Virginia. Among the incentives "current resident" could choose were financing at 1.5 percent interest, two years of paid homeowners association dues or upgrades such as a finished basement or finer floor coverings.
Hmm . . . that's the builder example I used on Monday. They must have a good marketing campaign.
. . . Lenders who specialize in new-home loans are used to dealing with the uncertain timetables associated with construction. On average, nine months pass between the loan application and delivery of the finished home, according to Tyrie. . . What if interest rates blip up to a level you cannot afford? For a fee, Wells Fargo allows borrowers to lock in their interest rate for as long as two years, awaiting delivery of their new home. (Other lenders who cater to the new construction market offer similar deals.) That kind of interest-rate protection is an important benefit if you have a contract to buy a property with an uncertain delivery date.
I wondered about the subject of interest rate risk when I found out that Toll Brothers' Warrenton development will start accepting contracts this Spring, but will delay building the houses for nearly two years. (They need to complete a water plant for the subdivision).
2 comments:
The following article does offer "guidance" on housing for those who plan to live in an area temporarily:
http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?ex=1333944000&en=ec338e837c48f84e&ei=5090&partner=rssuserland&emc=rss
(DC metro is quite transient. People leave and others come in. The turnover in housing is very high. I work closely with 6 Federal agencies and few are beefing up their staffs in the District. The truth is that they are downsizing in the area and moving people further out in the metro area or to other states. Reasons are many, but one I hear almost daily is that much of government needs to operate in more affordable areas of the country. Agencies have been unable to lure quality entry level employees due to high cost of living.)
Also, this bit of advice on incentives from a realtor friend of mine:
"Be wary of incentives that don't increase the value of your new home. If you get $30,000 to pay off credit card debts and your car, you're probably paying $30,000 too much for the house. That will make it hard to refinance
or sell."
kcwood,
That advice is spot on.
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