Choosing A Preferred Or Approved Lender When Buying New Construction

We all see the enticing advertisements hoping to sway us in choosing a lender. What’s the difference between a “Preferred” lender and an “Approved” lender and which one gets our loan accepted quicker?

A Preferred Lender is a loan originator who has a relationship with the builder and who has processed many of their loan packages. They know the builder’s processes and will keep the builder informed of any problems.

Approved Lenders are loan originators who no doubt will have strong credentials, but they usually don’t have an extensive history with the builder. Approved lenders have been qualified to work with specific loan packages. They follow stricter criteria, while not appeasing the builder. It’s not that you’ll get incompetent or inferior service by choosing an approved lender but you’ll probably miss out on some of the incentives that are only offered to those using a preferred lender.

1. Preferred lenders help expedite the loan approval and closing process.

2. Approved lenders have been certified and accepted to approve loans for specific loan packages.

So what should you do? Go with the “Preferred” or the “Approved”? Look for a lender that has a range of loan programs with a commitment to service. And while you’re at it, look for the benefits in the deal;

• Is the lender attentive? Send a few inquisitive emails to see how long it takes for a response.

• Ask them for quick summary of the top 3 programs you may qualify for? While many lenders may quickly tell you to complete an application to see which programs you’re eligible for, the real gems will mention their “star” programs that stand out and have general criteria. For example, I’d rather a lender mention a neighborhood revitalization program that provides down payment assistance for low, mid and higher incomes than receiving the standard answer of “complete a quick application so I can evaluate your options”.

• How long will a mortgage decision take after an application is submitted?

• What is the minimum down payment requirement for each type of loan?

• How long will a mortgage commitment remain effective?

• Does the interest rate remain constant on the loan commitment?

Even when you decide upon choosing a preferred or approved lender, you should still do your homework; Study the types of lenders and their advantages and disadvantages for your situation.

Beyond the interest rates, there are closing fees and points, and occasionally commissions that you don't see. You will want to compare these for all the lenders on your list.

Compare a minimum of three or more lenders before making a decision. You'll want to compare rates, fees, and points, but you will also want to know a slew of other things. Don't be afraid to ask: Lenders know you have options, so being forthright should not be a problem.