Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Lately, mortgage rates have surged higher, climbing from as low as 2% to over 8% in some cases.
Despite this, home builders have been enjoying healthy sales of newly-built homes.
And somewhat incredibly, they haven’t had to lower their prices in many markets either.
The question is how can they continue to charge full price if financing a home has gotten so much more expensive?
Well, there are probably several reasons why, which I will outline below.
The first thing working in the home builders’ favor is a lack of competition. Typically, they have to contend with existing home sellers.
A healthy housing market is dominated by existing home sales, not new home sales.
If things weren’t so out of whack, we’d be seeing a lot of existing homeowners listing their properties.
Instead, sales of newly-built homes have taken off thanks to a dearth of existing supply.
In short, many of those who already own homes aren’t selling, either because they can’t afford to move. Or because they don’t want to lose their low mortgage rate in the process.
This is known as the mortgage rate lock-in effect, which some dispute, but logically makes a lot of sense.
At the same time, home building slowed after the early 2000s housing crisis, leading to a supply shortfall many years later.
Simply put, there aren’t enough homes on the market, so prices haven’t fallen, despite much higher mortgage rates.
There’s also this notion that home prices and mortgage rates have an inverse relationship.
In that if one goes up, the other must surely come down. Problem is this isn’t necessarily true.
When mortgage rates rose from record lows to over 8% in less than two years, many expected home prices to plummet.
But instead, both increased. This is due to that lack of supply, and also a sign of strength in the economy.
Sure, home buying became more expensive for those who need a mortgage. But prices didn’t just drop because rates increased.
History shows that mortgage rates and home prices don’t have a strong relationship one way or the other.
Things like supply, the wider economy, and inflation are a lot more telling.
For the record, home prices and mortgage rates can fall together too!
So we know demand is keeping prices mostly afloat. But even still, affordability has really taken a hit thanks to those high rates.
You’d think the home builders would offer price cuts to offset the increased cost of financing a home purchase.
Well, they could. But one issue with that is it could make it harder for homes to appraise at value.
One big piece of the mortgage approval process is the collateral (the property) coming in at value, often designated as the sales price.
If the appraisal comes in low, it could require the borrower to come in with a larger down payment to make the mortgage math work.
Lower prices would also ostensibly lead to price cuts on subsequent homes in the community.
After all, if you lower the price of one home, it would then be used as a comparable sale for the next sale.
This could have the unintended consequence of pushing down home prices throughout the builder’s development.
For example, if a home is listed for $350,000, but a price cut puts it at $300,000, the other homes in the neighborhood might be dragged down with it.
That brings us to an alternative.
Instead of lowering prices, home builders seem more interested in offering incentives like temporary rate buydowns.
Not only does this allow them to avoid a price cut, it also creates a more affordable payment for the home buyer.
Let’s look at an example to illustrate.
Home price: $350,000 (no price cut)
Down payment: 20%
Loan amount: $280,000
Buydown offer: 3/2/1 starting at 3.99%
Year one payment: $1,335.15
Year two payment: $1,501.39
Year three payment: $1,676.94
Year 4-30 payment: $1,860.97
Now it’s possible that home builders could lower the price of a property to entice the buyer, but it might not provide much payment relief.
Conversely, they could hold firm on price and offer a rate buydown instead and actually reduce payments significantly.
With a 3/2/1 buydown in place, a builder could offer a buyer an interest rate of 3.99% in year one, 4.99% in year two, 5.99% in year three, and 6.99% for the remainder of the loan term.
This would result in a monthly principal and interest payment of $1,335.15 in year one, $1,501.39 in year two, $1,676.94 in year three, and finally $1,860.97 for the remaining years.
This assumes a 20% down payment, which allows the home buyer to avoid private mortgage insurance and snag a lower mortgage rate.
If they just gave the borrower a price cut of say $25,000 and no mortgage rate relief, the payment would be a lot higher.
At 20% down, the loan amount would be $260,000 and the monthly payment $1,728.04 at 6.99%.
After three years, the buyer with the higher sales price would have a slightly steeper monthly payment. But only by about $130.
And at some point during those preceding 36 months, the buyer with the buydown might have the opportunity to refinance the mortgage to a lower rate.
It’s not a guarantee, but it’s a possibility. In the meantime, they’d have lower monthly payments, which could make the home purchase more palatable.
Price Cut Payment |
Post-Buydown Payment |
|
Purchase Price | $325,000 | $350,000 |
Loan Amount | $260,000 | $280,000 |
Interest Rate | 6.99% | 6.99% |
Monthly Payment | $1,728.04 | $1,860.97 |
Difference | $132.93 |
At the end of the day, the easiest way to lower monthly payments is via a reduced interest rate.
A slightly lower sales price simply doesn’t result in the savings most home buyers are looking for.
Using our example from above, the $25,000 price cut only lowers the buyer’s payment by about $130.
Sure, it’s something, but it might not be enough to move the needle on a big purchase.
You could take the lower price and bank on mortgage rates moving lower. But you’d still be stuck with a high payment in the meantime.
And apparently home buyers focus more on monthly payment than they do the sales price.
This explains why home builders aren’t lowering prices, but instead are offering mortgage rate incentives instead.
Aside from temporary buydowns, they’re also offering permanent mortgage rate buydowns and alternative products like adjustable-rate mortgages.
But again, these are all squarely aimed at the monthly payment, not the sales price.
So if you’re shopping for a new home today, don’t be surprised if the builder is hesitant to offer a price cut.
If they do offer an open-ended incentive that can be used toward the sales price or interest rate (or closing costs), take the time to consider the best use of the funds.
Those who think rates will be lower in the near future could go with the lower sales price and hope to refinance. Just be sure you can absorb the higher payment in the meantime.
Read more: Should I use the home builder’s lender?
Source: thetruthaboutmortgage.com
Million-dollar homes are the perfect blend of form and function, setting the stage for true elegance and luxury.
Whether it’s the understated minimalism seen in Kim Kardashian’s home or the opulent maximalism of designer high-end houses, the key lies in creating spaces where functionality becomes virtually invisible, contributing to an overall aesthetic that’s both breathtaking and discreet.
You can see this in the prohibitively expensive homes from shows like Selling Sunset and Million Dollar Listing. Those million-dollar homes focus on hiding conventional features and appliances, allowing the eyes to revel in the design without distraction.
The philosophy here is simple yet profound: less is more.
Luxury design hinges on the power of illusion – making the essential elements of a home feel like an integrated, almost indistinguishable part of the overall design.
This invisible functionality transforms living spaces into masterpieces of high-end hospitality and cozy elegance, where every detail is meticulously crafted to elevate the experience of luxury living.
Looking at luxury homes and apartments, you won’t find their microwave, stove, or refrigerator glaring out like sore thumbs in the kitchen.
One of the best examples we’ve seen of this is in actor Jesse Tyler Ferguson’s house in Encino, a newly built contemporary house in Los Angeles with impeccable interiors.
The impressive property’s most distinctive interior traits are the warm wood tones used throughout, which serve as both décor elements and provide tons of storage space — particularly in the kitchen, which is clad in cabinets and wood paneling made out of hemlock wood.
The refrigerator is an essential appliance in any home but as we can see in the Modern Family star’s home, it is artfully hidden within the cabinetry.
It perfectly matches the surrounding cabinets, giving a unified and uninterrupted visual flow that exudes sophistication.
Similarly, the microwave is tucked away, out of the direct line of sight, allowing guests to focus on the elegant lines and luxurious finishes of the kitchen without the distraction of appliances.
Strategically concealing appliances amplifies the spaciousness and clean lines that are synonymous with luxury, making the kitchen not just a place for meal preparation but a statement of design excellence.
That’s not because the owners don’t own any and eat out for every meal but because their appliances are expertly designed to be hidden away when they are not needed.
Luxury designs do not break the viewer’s experience of ah and wonderment with the typical microwave or fridge sticking out.
When it comes to the interiors of the most coveted million-dollar listings, the devil is in the details—or perhaps, it’s the lack thereof. The luxurious spaces you see have a secret: the art of concealment.
This is particularly true when it comes to the mechanics of comfort, like HVAC air diffusers, which are essential yet often an eyesore.
But not in these homes. Here, they’re incorporated with such finesse that they’re almost invisible, represented by the hardly visible lines blending into the ceilings and walls as seen in the image below.
These aren’t your standard vents; they’re design statements in their own right, albeit in the most understated way.
Frameless diffusers like the ones from Invi Air are installed into the drywall and colored to match the room’s palettes for a nearly invisible finished look flush with the wall or ceiling.
They don’t demand attention. Instead, they support the room’s ambiance in quiet anonymity, allowing the stunning vistas outside the window or the curated art pieces to hold the gaze. Invi Air diffusers are easily customizable with any type of paint, allowing them to blend seamlessly with the color and texture of the surrounding surface.
In the modern luxury home, the television—once the centerpiece of every living room—has found a new role as the hidden gem of the room.
The trend in million-dollar homes is clear: the TV should be felt, not seen until it’s time for it to shine.
This philosophy has created creative solutions that make the TV almost magically appear when needed and disappear when not, maintaining the room’s sleek, elegant aesthetic.
Take Samsung’s Frame TV, for example. This ingenious device takes the concept of ‘hidden in plain sight’ to new heights, doubling as a digital art display when not in use.
It sits flush with the wall, encased in a stylish frame that one might mistake for an actual painting or photograph.
It’s a perfect fit for spaces where the presence of technology needs to blend with the strokes of interior design finesse.
Take this one step further with LG’s latest technological innovation: the transparent TV.
The TV becomes practically invisible when not in use and can even blend itself to look like a live fish tank or fireplace to disguise itself further.
When the TV is revealed, it’s not just about catching up on the latest series or movie; it’s an event. The act of the screen coming to life from its artistic camouflage adds a layer of luxury and technical prowess to the space. It’s a conversation starter, a nod to the homeowner’s taste for elegance and their flair for the dramatic.
The TV in a luxury home is no longer just a piece of technology; it’s part of the home’s dynamic, an indulgent experience that’s there when you want it without compromising the minimalist ethos of the space.
This approach to home entertainment design is yet another detail that sets high-end homes apart, offering a seamless blend of lifestyle and luxury.
As all the posh houses seen on Selling Sunset prove time and time again, a million-dollar home’s aesthetic is a symphony of design and technology where every note is perfectly pitched for an experience that’s both sumptuous and smart.
These homes aren’t just living spaces but canvases for expressing the height of personal luxury, where every hidden feature is a brushstroke in a masterpiece of modern living. And we don’t find it fair that they’re reserved for luxury homeowners, so we hope the above tips might inspire you and you’ll end up implementing them in your own home.
*Featured image credit: R ARCHITECTURE on Unsplash
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Source: fancypantshomes.com
Housing starts in December came in at a seasonally adjusted annual rate of 1.46 million, above consensus expectations of 1.43 million. Single-family housing starts (1.03 million) were 16% higher than a year ago, and permits for single-family homes reached their highest level since May 2022. Homebuilders are expressing greater optimism for two reasons: the anticipation … [Read more…]
Mortgage rates ticked up last week after weeks of declines while applications for home loans dropped in a sign that the housing market continues to struggle despite some recent signs of optimism.
The 30-year fixed rate inched closer to 7 percent for the week ending December 29, according to the Mortgage Bankers Association (MBA). Meanwhile, mortgage applications tumbled by more than 9 percent from two weeks earlier, lenders said.
“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” Joel Kan, MBA’s deputy chief economist, said in a statement shared with Newsweek on Wednesday.
The 30-year fixed mortgage ended 2023 at 6.76 percent, more than a percentage point lower than the peak of nearly 8 percent in October, he said.
“The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12 percent lower than a year ago,” Kan said.
Economists say that activity in the housing market will ramp up if prices decline, which at the moment are elevated partly due to low supply. The existing homes market is still in the doldrums as sellers are reluctant to give up their low rates for new home loans that could cost them close to 7 percent in interest.
“The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months in come,” Kan said.
Recent data shows that private residential construction moved up, according to the U.S. Census Bureau, to nearly $900 billion in November—a jump of more than a percent from the previous month, helped by spending on single-family home building.
“November was the first month in over a year when single-family construction spending rose compared to the year prior,” Yelena Maleyev, KPMG’s senior economist, said in a note shared with Newsweek on Tuesday. “Builders have become more positive about the single-family market as mortgage rates have come down from recent peaks and revived buyers’ interests.”
In a sign that rates may be entering some level of uncertainty, as the market looks to see how many rate cuts the Fed will institute in 2024, the average contract interest rate for 15-year fixed-rate mortgages decreased to 6.26 percent from 6.41 percent in the week ending December 29.
Fed policymakers held rates at 5.25 to 5.5 percent last month for the third time in a row and have suggested that they may cut rates to a possible 4.6 percent in 2024. It’s unclear yet when such cuts could come.
But declining mortgage rates could give a boost to the housing market, with builders feeling optimistic in the new year.
“Construction activity remains robust as strong demand for housing and infrastructure remain a tailwind for builders,” Maleyev said, noting that elevated rates could be a challenge for the sector in 2024. “Spending is expected to end the year on a high, with lower mortgage rates helping revive activity in the housing market.”
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
The recent dip in mortgage rates has made homebuilders more hopeful that they can once again start pouring concrete and raising roofs. But most are hedging their bets and many are still lowering prices or offering incentives to attract buyers.
Builders’ confidence rose from 34 to 37 points in December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The index is based on a monthly survey of builders that includes various factors. “The HMI index gauging traffic of prospective buyers in December rose three points 24, the component measuring sales expectations in the next six months increased six points to 45 and the component charting current sales condition held steady at 40,” the report stated.
“Any number over 50 indicates that more builders view conditions as good than poor,” it noted. The increase in December, therefore, while positive, indicates that there is a long way to go before homebuilders have a broadly optimistic outlook. Regionally, only the Northeast’s HMI score rose above 50, with a two-point increase to 51 based on three-month moving averages. The Midwest dipped one point to 34, the South fell three points to 39 and the West sank four points to 31.
On the brighter side, the 50 basis point drop in mortgage rates in the past month has drawn more prospective buyers to scout out new homes.
Builders’ recent pessimism has been somewhat counter to gains for the pace of single-family permits and starts during this time frame, according to NAHB Chief Economist Robert Dietz.
“Our statistical analysis indicates that temporary and outsized differences between builder sentiment and starts occur after short-term interest rates rise dramatically, increasing the cost of land development and builder loans used by private builders,” Dietz commented.
“While the Federal Reserve is fighting inflation, state and local policymakers could also help by reducing the regulatory burdens on the cost of land development and home building,” he noted.
Dietz predicted that the gap between builder sentiment and construction activity would decrease once interest rates moderate.
Meanwhile, with mortgage rates still higher than 7%, builders continue to take financial hits to try to lure buyers. The NAHB data show that 36% cut home prices in December by an average of 6%, as they had in November, while 60% of builders offered sales incentives of all forms.
Source: globest.com
Both of the key metrics for residential construction, housing permits, and housing starts, beat analysts’ expectations in October. The U.S. Census Bureau and Department of Housing and Urban Development said permits rose 1.1 percent compared to September while housing starts increased by 1.5 percent.
Permits were issued at a seasonally adjusted annual rate of 1.487 million units compared to 1.471 million units in September. The September estimate was only a slight revision from the 1.473 million originally reported. Analysts polled by Econoday had estimated that permits would come in at 1.463 million units.
The permits issued in October 2023 were 4.4 percent fewer than the 1.555 million permits authorized in October 2022.
The annual rate of permitting for single-family houses was 968,000 units, 0.5 percent higher than the 963,000 units in September and an improvement of 13.9 percent year-over-year. Multifamily permits increased by 2.2 percent to 469,000 but dropped 27.9 percent compared to October 2022.
On a non-adjusted basis, there were 124,000 permits issued last month, 79,700 of which were for single-family houses, an improvement on the relative numbers in September of 116,700 and 76,500. Permits for the first nine months of 2023 total 1.252 million, down 13.8 percent from the same period last year. The 773,600 permits for single-family houses are a reduction of 10.6 percent from the same period last year and the 432,300 multifamily represent a decrease of 20.1 percent.
Privately-owned housing starts were at a seasonally adjusted annual rate of 1.372 million units compared to 1.346 million units in September, a downward revision from the 1.358 million units reported in October. Starts remained lower on an annual basis, in this case by 4.2 percent. Analysts had estimated that housing starts would be at a 1.350 million annual rate.
Single-family construction starts were at an annualized rate of 970,000 units, annualized, compared to 968,000 units in September and 858,000 units in October 2022, gains of 0.2 and 13.1 percent, respectively. Multifamily starts increased by 4.9 percent compared to September but were 31.8 percent lower year-over-year.
There were 115,400 residential construction starts in October, units 900 fewer than in September. Single-family starts were flat at 81,400.
Thus far in 2023, there have been 1.194 million residential units started, 11.3 percent fewer than by the end of October 2022. Single-family starts have declined from 884,200 to 790,600 and multifamily starts at 392,00 are down 12.4 percent.
Robert Dietz, chief economist of the National Association of Home Builders (NAHB) commented on the Census Bureau report. “Despite higher interest rates in October, the lack of existing home inventory supported demand for new construction in the fall. NAHB is forecasting improving conditions for single-family home building, as the 10-year Treasury rate has returned to near 4.5 percent, with an outright gain for single-family starts in 2024.” NAHB, however, is forecasting a decline for multifamily construction in 2024.
There were 122,200 homes completed in October, including 85,400 single-family houses and 36,000 multifamily units. Completions for the year-to-date total 1.190 million units, a 5.0 percent annual increase. Single-family completions are down 1.7 percent to 819,600 units but 361,000 multifamily units have come online, a 23.6 percent increase.
At the end of October, there were 1.674 million residential units under construction, 669,000 of which were single-family houses. There were an additional 281,000 permits outstanding, exactly half of which were for single-family units.
In the Northeast region, permits were 15.6 percent higher than in September and 12.5 percent above the October 2022 rate. Starts dropped by 14.5 percent from the previous month and 24.5 percent compared to a year earlier. Completions were 1.0 percent higher than the prior October.
The Midwest saw a decline in permits of 10.6 percent for the month and 21.8 percent year-over-year. Starts were 28.4 percent and 5.2 percent higher than the two earlier periods. Nine percent fewer units came online than in October 2022.
Permitting rose in the South by 3.1 percent but lagged the prior October rate by 5.3 percent. Construction starts fell 6.8 percent and 8.1 percent. Completions were down 1.7 percent on an annual basis.
There was a 1.7 percent dip in permitting in the West, but the rate rose 3.6 percent on an annual basis. Starts grew 12.5 percent from the prior month’s level and were 4.7 percent higher than in October 2022. Completions dropped 16.6 percent year-over-year.
Source: mortgagenewsdaily.com
It’s time to check out “Inspire Home Loans,” which is the lending partner of home builder Century Communities.
They pride themselves on knowing how their parent company’s construction timelines work so your home (and) loan remain on schedule.
In addition, they offer special financing deals that are reserved only for the buyers of properties in their communities.
This means you might be able to get your hands on a low mortgage rate that outside lenders just can’t beat.
Read on to learn more about them to determine if they could be a good fit for your mortgage needs.
Inspire Home Loans is a wholly owned subsidiary of Century Communities, which offers to-be-built and quick move-in homes in a handful of states nationwide.
Their parent company consider themselves a top-10 home builder nationally, and is publicly traded under the NYSE symbol CCS.
The lending division has been around since 2016 and is headquartered in Newport Beach, CA.
Their primary focus is providing home purchase loans to buyers of newly-built homes in the many communities they operate throughout the country.
They are licensed in 18 states, including Alabama, Arizona, California, Colorado, Florida, Georgia, Indiana, Louisiana, Kentucky, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee, Texas, Utah, and Washington.
Per HMDA data, they are most active in the states of California, Colorado, Georgia, Nevada, and Texas.
They’ve currently got 63 sponsored mortgage loan originators (MLOs) on their staff per the NMLS.
Similar to other builder-affiliated lenders, Inspire Home Loans also operates a title insurance and settlement company called Parkway Title, and an insurance agency called IHL Home Insurance Agency.
This means you can do one-stop shopping for all your home loan needs, though it’s always prudent to shop around for these third-party services as well.
You can either visit a Century Communities new home sales office to get paired up with a loan officer, or simply go online.
If you go to their website, you can click on “Pre-qualify Today” to access a loan officer directory that lists the many communities operated by their parent company.
After selecting a state, you’ll be able to select a community to see which loan officers serve that particular development.
From there, you’ll see contact info and you’ll have the ability to get pre-qualified for a mortgage or log in if you’ve already applied.
Their digital loan application is powered by fintech company nCino. It allows you to eSign disclosures, link financial accounts, and complete the app from any device.
Once you’ve applied and been approved, you can satisfy conditions electronically by uploading necessary documents 24/7.
You’ll receive automatic status updates as your loan makes it from underwriting to closing.
You can also lean on your dedicated, human loan team that is available to assist and provide answers whenever you have questions.
They appear to offer a good balance of both tech and human touch to get you to the finish line.
And because they are affiliated with the builder, they’ll be able to communicate freely and keep your loan on track based on construction status.
As noted, Inspire Home Loans exists to serve buyers of Century Communities properties.
Since that’s all they focus on, they should have a good handle on the process.
In terms of loan choice, they’ve got all the major loan programs a home buyer could need, including conforming loans, jumbo loans, and the full array of government-backed loans.
This includes FHA loans, VA loans, and even USDA loans if purchasing a property in a rural location.
Both fixed-rate and adjustable-rate mortgage options are available, including the 15-year fixed, 5/6 ARM, and 7/6 ARM.
Additionally, they’ve got access to numerous homebuyer assistance programs, including down payment assistance and municipal bond programs.
These can come in handy if you’re short on down payment funds and/or need help with closing costs.
Inspire Home Loans also offers free access to a program called “The Ascent Club.”
It provides financial insights and recommendations to help prospective customers reach their homeownership goals.
This could include learning how to save for a down payment, how to build asset reserves, how to boost credit scores, and even improve your DTI ratio.
The goal is put homeownership within reach if there are certain fixable barriers that are holding you back.
And whether you’re a first-time home buyer or seasoned pro, they conduct free webinars to answer any mortgage questions you may have.
They don’t list their mortgage rates or lender fees online, which isn’t atypical. But I do give lenders kudos when they do. It’s a plus from a transparency standpoint.
So we don’t know how competitive they are relative to other lenders, nor do we know if they charge a loan origination fee, underwriting and processing fees, application fee, and so on.
Be sure to inquire about any and all fees when you first discuss loan pricing with a mortgage loan officer.
Once you get a rate quote, that along with the lender fees makes up your mortgage APR, which is a more effective way to compare loan costs from lender to lender.
Despite the lack of information, they do advertise mortgage rate buydowns on their home builder website.
And from what I saw, they were some of the biggest permanent and temporary mortgage rate buydowns around.
One example offered a 2/1 buydown to 3.5% for the first year, 4.5% in year two, and 5.5% fixed for the remaining 28 years.
That’s pretty tough to beat when mortgage rates are close to 7.5 today%
But as always, take the time to shop your rate with other lenders, credit unions, mortgage brokers, and so on.
Over at experience.com, Inspire Home Loans has an excellent 4.89/5-star rating from over 1,500 customer reviews.
However, they have a 1.8/5 on Yelp from about 30 reviews, though the sample size is obviously quite small. At Redfin they have a better 4.4/5 from 7 reviews, which again is a small sample.
You can also search their individual offices throughout the country on Google to see reviews by location. This could be more helpful if you work with a particular regional office.
Their parent company has an ‘A+’ rating on the Better Business Bureau (BBB) website and has been accredited since 2015.
Despite the solid letter grade rating, they’ve got a poor 1.05/5-star rating based on over 100 customer reviews. This could have to do with their numerous complaints filed over the years.
Be sure to take the time to read through some of them to see how many pertain to their lending division versus their new home building unit.
Of course, chances are if you’re using Inspire Home Loans to get a mortgage, you’re also buying a Century Communities property.
To sum things up, Inspire Home Loans has the latest tech, a good array of loan programs, and may offer pricing specials that outside lenders can’t compete with.
They have some mixed reviews, but mostly positive ones, though your mileage may vary depending on who you work with.
But even if the process has hiccups, the savings from a big mortgage rate buydown could be worth it.
Still, take the time to shop third-party lenders, brokers, banks, etc. With other offers in hand, you can negotiate and potentially land an even better deal.
The Good
The Maybe Not
Source: thetruthaboutmortgage.com
It’s time to check out “Toll Brothers Mortgage,” which is a subsidiary of home builder Toll Brothers.
Toll Brothers is one of the largest home builders in the United States, priding itself on being a luxury home builder.
Instead of relying on third-party lenders to provide financing to their customers, they have a built-in financing division.
This allows them to oversee the process firsthand and navigate the complexities of new construction financing.
They say they’ve got a proven track record of smooth closings, and if they can offer you a mortgage rate the other guys can’t, they could be worth looking into.
As noted, Toll Brothers is a major home builder, the fifth largest at last glance, behind only D.R. Horton, Lennar, Pulte, and NVR.
They are a publicly-traded company (NYSE:TOL) and are currently valued at around $9 billion.
The company was founded in 1967 and refers to itself as the nation’s leading builder of luxury homes.
This includes both new construction homes and quick move-in homes. The company’s dedicated mortgage division is known as Toll Brothers Mortgage Company, or TBI Mortgage for short.
They exist solely to serve Toll Brothers customers who need to finance their new home purchases, and have about 77 loan officers on staff, per the NMLS.
In 2022, the company funded a healthy $2 billion in home loans, with 20% of volume coming from the states of California and Texas, and another 9% from Pennsylvania.
The company also did a lot of business in Arizona, Colorado, Florida, Idaho, Nevada, and Virginia.
They are licensed to lend in Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Washington.
Those purchasing a Toll Brothers home can also take advantage of in-house title, escrow, and insurance services via Toll Brothers Insurance Agency.
To begin, you can visit a new home sales office or simply check out their website.
If you go online, they have a contact form and a loan officer directory that lists individual employees by state.
They can provide loan pricing and answer mortgage questions you might have about the loan process.
If you’re ready to proceed, they’ll ask you to complete a mortgage pre-qualification questionnaire and create a secure Toll Brothers account.
Within 14 days of signing a home purchase agreement, you’ll be asked to submit the loan application and upload required documents.
Their digital loan application is powered by ICE (formerly Ellie Mae). It allows borrowers to start the process from any device and complete most tasks electronically.
This includes linking accounts like pay stubs, tax returns, bank statements, along with eSigning necessary disclosures.
If approved, they’ll provide you with a loan commitment, as well as conditions needed to fund your loan.
Importantly, the loan approvals are valid through the completion of your home. And are integrated with Toll Brothers to sync with the builder process.
Since building a new construction home can take up to 12 months, their loan process may have longer timelines than a typical existing home purchase.
But they also offer quick move-in properties, in which case the process will likely only be 30 to 45 days.
While Toll Brothers Mortgage only offers home purchase loans (no mortgage refinances), they have a decent loan menu.
This includes all the usual offerings such as conforming loans backed by Fannie/Freddie, jumbo loans, FHA loans, and VA loans.
The only loan programs they appear to be missing are USDA loans and second mortgages, though these aren’t widely used by home buyers these days.
They’ve got a good selection of both fixed-rate mortgages and adjustable-rate mortgages, including a 10-year fixed and 15-year fixed.
With regard to the adjustable-rate loans, they’ve got the 5/6 ARM, 7/6 ARM, and even an ARM with an initial fixed term of 15 years.
And you can get an ARM if taking out an FHA loan or VA loan, which is less common.
So there’s no shortage of loan programs, and they finance primary residences, second homes and investment properties.
Like other mortgage lenders, they do not have a page dedicated to mortgage rates, nor are they publicized elsewhere.
Instead, they simply say they offer “competitive rates,” which obviously doesn’t give us a lot to go on.
However, they offer personalized financing packages and there’s a good chance they’ve got some special financing offers unique to home builders.
If you browse the Toll Brothers main website, you might see specials for certain communities.
I came across an exclusive offer of 5.99% on a 30-year fixed while rates are closer to 7.5% at the moment.
Lately, the captive mortgage lenders of home builders have been hard to beat, thanks to their big temporary and permanent mortgage rate buydowns.
Many are offering rates well below market if you buy certain homes by a specific date.
But always take the time to compare their rates and fees to outside lenders as well. You’ll never know what else is out there if you don’t put in the time to look.
Since the home building process can take time, Toll Brothers Mortgage offers a special mortgage rate program called “LockSolid Rate Protection.”
Since It allows home buyers to lock in a mortgage rate for up to 345 days, with no cost until loan closing.
The up-front lock deposit is advanced by Toll Brothers, giving buyers peace of mind in an uncertain mortgage rate environment.
Additionally, a float down option is available on many programs. So if rates happen to fall below the rate you locked in within 30 – 45 days of closing, they can re-lock your loan at a better price.
The program is available on both fixed- and adjustable-rate mortgages offered by the company.
Just keep in mind that it doesn’t always make sense to lock in a rate well ahead of time. If you have an extended time horizon, floating your mortgage rate can provide more opportunities.
It’s also generally cheaper to lock in a rate with a shorter lock period.
There aren’t a ton of reviews for Toll Brothers Mortgage specifically, though I did come across some.
Over at Zillow, they have a pretty poor 1.36/5-star rating from about a dozen reviews. Not a big sample size, but not glowing reviews either.
Similarly, they have a 1.8/5 from another dozen mortgage reviews on Google for their Fort Washington, PA headquarters.
They have a 5-star rating on Redfin, but it’s only from three reviews. Meanwhile, their parent company has a 1.12/5 rating on the Better Business Bureau (BBB) website from 85 reviews.
However, the company maintains an ‘A+’ rating based on customer complaint history, so they appear to handle issues that come up appropriately.
Take the time to read the customer reviews and complaints to see what the common issues are, and how you might be able to avoid them.
At the end of the day, using the builder’s lender can make sense if they offer a below-market mortgage rate.
There’s also the perception that they’re in better sync with the builder as the companies operate under the same parent.
But based on the complaints, this isn’t always the case. So be sure to shop around and get quotes from other mortgage companies and some independent mortgage brokers too.
Even if you do decide to use Toll Brothers Mortgage, you can use those other quotes to negotiate a better deal.
The Good Stuff
The Maybe Not
(photo: Montgomery County Planning Commission)
Source: thetruthaboutmortgage.com
Today we’ll check out another home builder’s in-house mortgage lender, this time KB Home’s “KBHS Home Loans.”
As the name suggests, they are the affiliated lender for home builder KB Home, a SoCal-based company that has been around since the 1950s.
KB Home has a big home building presence in its home state, along with nearby Arizona and Nevada, Texas, and Florida.
To facilitate the sale of their homes, they lean on KBHS Home Loans to streamline the financing process.
What’s perhaps more interesting is that they are backed by another lender, Guaranteed Rate, which is a top-10 lender nationally.
KBHS Home Loans is the in-house mortgage lender for parent company KB Homes.
They primarily offer home purchase loans to the buyers of their newly-built homes located throughout the country.
The Southern California based home builder has been around since 1957, having previously been named after founders Eli Broad and Donald Kaufman as the “Kaufman and Broad Building Company.”
One of their claims to fame is the creation of the “Townehouse” design, intended to woo consumers who would typically rent instead of buy a home.
The company later changed its name to KB Home in 2001 and today refers to itself as the “#1 customer-ranked national homebuilder.”
That’s based on TrustBuilder ratings and reviews that are powered by NewHomeSource, a site that apparently lists honest reviews from real homeowners.
Anyway, KB Home established its own mortgage company back in 1965, and that eventually morphed into what is now KBHS Home Loans.
Interestingly, KBHS Home Loans was formed in 2016 as a joint venture between KB Home and Stearns Lending.
Stearns Lending was acquired by Guaranteed Rate in early 2021.
This explains the disclaimer on their website that says all loan programs subject to Guaranteed Rate, Inc. underwriting guidelines.
They are licensed in 10 states nationwide, including Arizona, California, Colorado, Florida, Idaho, North Carolina, Nevada, South Carolina, Texas, and Washington.
Last year, the company funded a solid $3.5 billion in home loans, with a good chunk of it coming from their home state of California.
They were also quite active in Arizona, Colorado, Florida, Nevada, and Texas, where they have home building operations.
KBHS Home Loans prides itself on being a fully-integrated, dedicated mortgage lender for KB Home, with daily collaboration to ensure things keep moving along on schedule.
Like other home builders, they also have an affiliated insurance company, KB Home Insurance Agency, and title insurance business, KB Home Title Services.
To get started, you can either visit a new home community or surf on over to the KBHS Home Loans website.
If you do the latter, they have an online loan officer directory and a contact form if you prefer for someone to reach out directly.
There is also a learning center with a mortgage glossary, free mortgage calculator, informative videos and articles, and a FAQ section.
When you’re ready to apply, you can do so electronically via their digital loan application from a computer, tablet, or smartphone.
It allows you to complete the process mostly paperlessly, with the ability to link financial accounts (bank, employer, etc.) and securely upload documentation.
Once your loan is submitted, you’ll be able to log in to the borrower portal 24/7 to check loan status, satisfy outstanding conditions, or get in touch with your lending team.
KBHS Home Loans loan officers also have the ability to screen share in real-time if you need extra help you complete any step of the mortgage process.
When it comes time to fund, their so-called FlashClose process allows borrowers to sign most of their closing documents electronically.
This means you can digitally review and share documents in advance with your attorney or settlement agent and spend less time at the closing table.
KBHS Home Loans offers all the usual products you expect to see from a mortgage lender, though they primarily focus on home purchase loans.
This includes conforming loans, jumbo loans, and the full suite of government-backed loans including FHA loans, VA loans, and USDA loans.
One thing that stands out with KBHS Home Loans is their adjustable-rate mortgage offerings.
They advertise ARMs more than other lenders and seem to have more options in this department.
So if you think mortgage rates will come back soon within the next 5-7 years, a hybrid ARM such as the 5/6 ARM or 7/6 ARM could be a good bridge.
Of course, they also offer fixed-rate mortgages as well, including the 30-year fixed and 15-year fixed.
And it might be possible to take advantage of a big rate buydown to keep your monthly payments down.
Many home builders have been offering big incentives lately as mortgage rates inch closer to 8%.
Those who use the builder’s lender may be entitled to special offers that likely won’t be found elsewhere.
I couldn’t find any information on their website regarding mortgage rates or lender fees. But they did have a special rate offering on the KB Home website.
It was a 7/6 ARM priced about two percentage points below the going rate for a 30-year fixed. So for those willing to go with an ARM, it presents a pretty big discount.
And it’s fixed for the first 84 months, giving the home buyer some breathing room before they need to consider a refinance, home sale, etc.
Typically, home builders offer mortgage rate buydowns, such as a 2-1 buydown, but perhaps those are becoming too expensive and there’s a shift to ARMs happening.
It’s unclear what their fixed mortgage rates are like so you’ll need to inquire about pricing when you speak to a loan officer.
As always, take the time to shop around with other non-affiliated banks, lenders, credit unions, and mortgage brokers.
It’s good to see what’s out there and gain some bargaining power in the process. You never want to look like you don’t have other options
KBHS Home Loans has a 4.9/5-star rating from over 3,000 Google reviews, which is impressive on both the review count and the score.
There are a lot of shining reviews from new home buyers, but also some poor reviews as well. You can filter by highest and lowest rating to see what other’s experiences were.
Their parent company, the home builder, has a 4.5/5 on NewHomeSource from nearly 9,000 customer reviews.
Over at the Better Business Bureau (BBB) website, they have an ‘A+’ rating based on complaint history, but a 1.08/5 rating based on the 84 customer reviews there.
They also have over 300 complaints over the past three years, including more than 170 over the past 12 months.
This is one of the challenges of running a home builder division and a mortgage lending division. It’s hard to make people happy in just one of those lines of business.
But if everything goes according to plan, they might be able to offer special incentives you might not find with other lenders or existing home sellers.
The biggest perk to using a home builder’s lender at the moment is the potential for a bought down rate.
Often, builders will offer big rate discounts to get you into a new home, or offer closing cost credits, or both.
This can ease affordability but some argue it’s at the expense of a higher sales price.
Regardless, do your research, gather quotes from outside banks/lenders, and take the time to negotiate.
While the process could be more streamlined with an affiliated lender/builder, don’t sacrifice price in the process. After all, the mortgage could stay with you a lot longer than the ~45 days it takes to get it.
The Good Stuff
The Perhaps Not
Source: thetruthaboutmortgage.com
One of the nation’s largest home builders, PulteGroup, also operates its own financing division called “Pulte Mortgage.”
This is a common setup employed by large builders that look to control the process from start to completion.
It allows them to streamline operations and move their homes in a timely fashion, without relying on third parties that might cause delays.
Their “one-stop shopping” experience allows them to work hand-in-hand with the builder to coordinate the processing of your loan with the construction of your new home.
Read on to learn more about their lending process, rates and fees, loan programs, and customer reviews.
Pulte Mortgage is the home lending division of its parent company PulteGroup, a top-3 home builder in the United States. Only Lennar and D.R. Horton are bigger than them.
The home builder’s roots stretch back to 1950 when then 18-year-old William “Bill” Pulte built a five-room bungalow near Detroit, Michigan. The company later went public two decades later.
Some of the company’s home building brands include American West, Centex, Del Webb, DiVosta Homes, John Wieland Homes, Neighborhoods, and of course Pulte Homes.
Pulte Mortgage has been in operation since 1972 and is headquartered in Englewood, Colorado. It has apparently helped more than 700,000 customers since opening its doors.
They offer home purchase financing to buyers of new homes throughout the country where they are licensed, 28 states at last glance.
Last year, the company funded about $7 billion in home loans, and were most active in Florida and Texas, with each state accounting for roughly 20% of overall volume.
Like other major home builders, they also have their own title insurance company, PGP Title, and insurance company, Pulte Insurance Agency.
First you must register for an account on the Pulte Mortgage website. Then you can access the electronic loan application.
They say they offer a high-touch digital mortgage experience, meaning a mix of the latest technology combined with a human lending team
Once you complete the digital mortgage app, you will be assigned a loan number and provided with access to your own personalized Loan Dashboard.
Any required documentation can be uploaded via smartphone/computer or securely linked to your application.
At this point, a designated loan team will be assigned, including a loan officer, loan processor, mortgage underwriter, and closer.
Pulte Mortgage prides itself on knowing its parent company’s processes and timelines better than anyone.
This means you should be in good hands when it comes to closing on time and avoiding any costly delays.
If and when you have questions, you can reach out to your loan team. You can also check loan status 24/7 to see where you’re at in the process.
They appear to make it easy to complete most tasks electronically/remotely, and their affiliated title and insurance agency may help streamline the process.
Just be sure to shop around for those services as well as the price and service can vary.
Pulte Mortgage says they have more than 200 different loan options. I’m not sure what those are, but they appear to offer all the basics you would expect from a full-service mortgage lender.
This includes conforming loans, jumbo loans, and government-backed loans, including FHA, USDA, and VA loans.
Both fixed-rate loans and adjustable-rate mortgages are available, including the 5/1 ARM, 7/1 ARM, and the 30-year fixed.
What they might offer that the other guys can’t is big mortgage rate buydowns if you use them and their parent company to buy/build a home.
Lately, builder’s financing divisions have been advertising mortgage rates that are 2% or more below prevailing market rates.
They only appear to offer home purchase loans (no mortgage refinances), which makes sense because they are a home builder.
With regard to property type, they provide financing on single-family homes, condos, townhomes, and anything else they develop.
All occupancy types should be permitted, assuming you’re buying a second home or investment property.
Unfortunately, they do not provide any information regarding their mortgage rates or lender fees on their website.
This isn’t uncommon, but I do give lenders transparency points when they provide these details online.
As mentioned, the only thing they do advertise is big mortgage rate buydowns on their website if you use them to buy a PulteGroup home.
It’s unclear what lender fees, if any, they charge. But be sure to look at the big picture, the mortgage APR, which incorporates the interest rate and fees.
And take the time to compare their offer to other unaffiliated lenders. It’s perfectly acceptable to buy a newly built home using a third-party bank, lender, or even mortgage broker.
Even if you plan on using them, it might not hurt to get additional quotes to increase your bargaining power.
On Zillow, Pulte Mortgage has an excellent 4.74/5-star rating from over 350 customer reviews.
But there are some mixed reviews if you take the time to read them, with some calling them pushy, incompetent, etc.
Perhaps more concerning is they have a 1.13/5 rating on the Better Business Bureau (BBB) from nearly 200 customer reviews. And more than 200 complaints over the past 12 months.
They also have an ‘NR’ rating, which could indicate there is an ongoing review/update of the business’s file on the BBB website.
Their headquarters also has a 2.4/5 Yelp rating from about 165 reviews, though they’ve got a 4.9/5 on Facebook from 1,100+ “votes.”
So a bit of a mixed bag here, which might require some reading of reviews to see what some of the issues have been.
Remember, at the end of the day you DO NOT need to use the home builder’s mortgage lender to purchase a newly-built home.
It’s always wise to shop around and get multiple quotes, including ones from the builder and unrelated banks/lenders.
That way you can compare offers, and if need be, negotiate with the builder’s lender with increased leverage.
You don’t want any one lender to think you don’t have options, so gathering multiple quotes might give you a leg up.
It may also open your eyes to better options/offers you weren’t previously aware of. This is the case whether buying a new home or an existing home.
Long story short, put in the time or you may face disappointment when it’s too late in the process to switch lenders.
The Good Stuff
The Maybe Not
Source: thetruthaboutmortgage.com