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Building a brand-new home can be very exhilarating. No one has lived in it before and you get to customize it from the ground up—literally!

However, there are A LOT of traps the builder has set in place to make the most money out of each transaction—and they work.

Not all builders are out to get you, but it is wise to consider a few things. Here are three things you can do to ensure you aren’t taken advantage of and are in fact getting the most for the money you’re spending.

Find your own realtor.
I cannot stress this point enough. Do not tour a builder home without your own realtor.

If you go into a builder without representation, an employee who works for the builder will represent you. This is not ideal because the person representing you will also be representing the seller (the builder). On top of this, the builder is literally the one cutting the pay checks to the person representing you. As a result, the builder rep has financial incentives to make the transaction or terms of the contract better for the builder. Things from the price to the legal liability will all be swayed to benefit the builder—not you.

PRO TIP: Unsure how to choose a realtor? We wrote a blog to help you.

Find your own home loan.
One of the first things the builder will ask is to become prequalified through their “preferred” lender. It seems harmless, but it’s not. Here’s why: what they really mean by “preferred” is “the lender we control and have a financial interest in.” Sure, they will try to influence you to use their lender by offering an incentive such as an extra $5,000 to use at the design center. Now, $5000 is nothing to ignore. That’s a lot of money! But that money isn’t real.

In most cases, the builder’s lender is owned by and/or has a financial interest tied to the builder. Each time a loan is closed with them, the builder gets money. They set the loan up to be extremely expensive. The costs and the rate are WAY above market value. As a result, the builder simply takes some of that extra profit and gives it back to you by way of an “incentive.” It feels like they’re doing you a favor, but they aren’t. Using their “preferred” lender will cost tens of thousands of extra dollars on the loan. What feels like a financial win is actually a huge financial loss. GOOD NEWS! If done right, you can still get the incentive from the builder and use your own lender.

PRO TIP: The builder may require you to get prequalified with their lender, but they cannot make you use their lender to buy the house. That is illegal. Therefore, you may get a quote from the builder’s lender, then get a quote from your own lender, and the builder’s lender will come back with a better option. This blog sheds some light on this practice.

Beware of the design center.
As mentioned earlier, buying a brand-new home is exciting. One of the most thrilling and emotionally charged parts is customizing your home at the design center. This is when you go to a show room full of the latest and greatest customizing features. Tile, granite, appliances, sinks, hardware, and much more. It’s a lot of fun, but you need to be cautious.

Although the experience the builder creates is fun, they aren’t creating it for you because they are nice. The builder is selling these upgrades and customizations. The builder knows you’re in an exciting experience and they charge you more than the market rate on each item you select. What may cost you $10,000 on your own will cost you $60,000 if done in the design center.

PRO TIP: Before you walk into the design center, go to Home Depot or Lowes. Take pictures of design options you like and note the costs. Then each time you find something you like in the show room, ask the design center representative what it costs so you can compare it to what you picked out independently. This will help you really decide what to choose. Many times, it makes more sense to take the standard items from the builder for now and upgrade later on your own once the home is built.

Are all builders looking to take advantage of you every chance they get? NO! Again, buying a home from a builder is fun. As a matter of fact, I have purchased a home from a builder before. However, considering the above information will help ensure your finances are protected throughout the process.

We provide the best rates, payments, and costs for your home loan. That’s why we won Mortgage Broker of the Year. Schedule an appointment below. We’d be happy to provide numbers to compare with your builder’s lender, to give you the best home loan possible.