When you choose to build a new home, you’re already making a smart investment in your future. But did you know that working with the builder’s preferred lender can unlock exclusive financing incentives designed to make your journey even smoother? These perks can help you save money, reduce stress, and move into your new home with confidence!
Rate Buydowns: Reduced Interest Rates
A popular incentive for new construction financing is a rate buydown, which allows a qualified borrower to temporarily or permanently reduce their interest rate. That may mean lower monthly payments, especially in the early years of a loan, giving borrowers more breathing room in your budget.
The most common mortgage buydown structures lenders use are 3-2-1 buydowns and 2-1 buydowns.
3-2-1 Buydowns
A 3-2-1 buydown enables a buyer to pay less interest on their mortgage for 3 years after obtaining the loan. The points paid upfront reduces the interest rate by 1% for each of those first 3 years. For example, say a homebuyer qualifies for a 30-year mortgage at an interest of 5%. With the 3-2-1 buydown, they would pay an interest rate of 2% the first year, 3% the second year and 4% the third year but would have to pay the full 5% from years 4 – 30.
2-1 Buydowns
A 2-1 buydown applies to only the first 2 years of the loan where the interest rate would be 2% lower in the first year and 1% lower in the second. Using the previous example, the buyer would be expected to pay an interest rate of 3% the first year, 4% the second year and 5% from years 3 – 30.
Rate Locks: Peace of Mind While You Build
New construction takes time, and interest rates can change on a dime! That’s why many homebuilders offer extended rate lock programs through their preferred lender. These rate locks protect your rate for a set amount of time, so you don’t have to worry about market fluctuations while your home is being built. Since a new construction home can take months to build, your lender may offer you an extended rate lock for periods of 180, 270, or 300 days.
Extended rate locks are available on select conventional, FHA and VA loans with an upfront fee. These fees are required at the time of rate lock and may be fully refundable if the loan is closed according to the terms and conditions set forth in the financing agreement.
Keep in mind that it is very difficult to predict what will happen with mortgage rates in the future, especially a year in advance. The best thing to do is to work closely with your Loan Team to analyze current interest rates and your own homebuying budget. Together, you can decide when it makes sense to lock in a mortgage rate.
Closing Cost Assistance: A Little Extra Help
Closing costs — which can include things like appraisal fees, loan origination charges, and title services — can add up quickly. That’s why builders may offer closing cost assistance when you finance through their preferred lender. This incentive can help cover a portion of those up-front expenses, making it easier to keep more money in your pocket for moving day.
Working with the builder’s preferred lender (like Pulte Mortgage!) often unlocks access to these exclusive incentives and more. Plus, your Loan Team is already familiar with the construction timeline, the builder’s process, and the community you’re buying in, making communication and coordination easier than ever!
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