Sydney is a single woman and veteran who recently purchased a home and is thrilled to be in a place she can call her own. As a veteran, Sydney was eligible to use her VA entitlement benefit to qualify for a VA fixed rate loan in Ohio based on her years of service in the United States military.
When it came time to find a lender, like many buyers following the path to homeownership, Sydney counted on the advice of someone she’d grown to trust: her Realtor. You don’t buy a home every day, so it makes sense to rely on a trusted professional to steer you in the right direction.
Sydney decided to purchase a condo in a new development, and her Realtor worked directly with the builder to negotiate the terms of the contract. Sydney was informed that the builder worked with a “preferred lender,” and that the builder would pay $3,000 of her closing costs if she obtained financing from this lender.
The builder (in this scenario, the seller) and the preferred lender have what is called an Affiliated Business Arrangement. This means they are required to disclose their relationship to any mutual clients, and they each may benefit financially from this arrangement.
Sydney obtained a quote from the preferred lender and shared it with her Realtor, who had become a trusted advisor by this point. Her Realtor thought the interest rate quoted seemed high and she advised Sydney to contact Sarah Engstrom and the Priority Mortgage team for a second opinion. When we spoke, we asked her to share the details of the offer she was provided, and we were shocked to learn that the rate was considerably higher than the best VA 30-year fixed rate loan that Priority could offer.
In fact, the interest rate quoted was SO high, we were able to offer an interest rate that was nearly half a percent lower than the rate offered by the builder’s preferred lender AND our team was able to pay the same $3,000 towards Sydney’s closing costs.
Then we had to educate Sydney on how that large discrepancy was possible. Sydney had two mortgage companies offering drastically different interest rates on the exact same loan. She informed the preferred lender that she had found better financing elsewhere. She was immediately told that management approval was obtained to allow them to match the terms offered by Sarah Engstrom and Priority Mortgage. This caused even more anxiety and confusion for Sydney.
If a lower rate was available, why wasn’t it offered to her sooner? Why wasn’t she offered the best possible loan terms in the beginning? And why would the builder’s preferred lender offer such poor terms, and then quickly do an about-face as soon as Sydney learned their loan terms are highly overpriced?
The Priority Result: If Sydney didn’t rely on her Realtor to review the loan terms and costs, she never would have known that she could qualify for a rate of 3.625% by going with Priority rather than 4.25% with the builder’s preferred lender.* This savings will result in Sydney paying $27000 less in mortgage interest over the life of the loan – we’d say that’s fairly significant.
Our goal in sharing Sydney’s story is to raise awareness. Do your due diligence and compare your offer to a lender that comes highly recommended by someone you trust. That may be your Realtor, a friend, a colleague or a family member. Save yourself the trouble of choosing a random lender that may not have your best interests in mind.
*The builder preferred lender disclosed rate was 4.25% with an unverified APR versus the Priority Mortgage disclosed rate of 3.625% with an APR of 3.956%.
For more reasons why you should choose Priority Mortgage, click here.