Lender to offer low financing for new construction builds?

[Connor Williams]

I saw another builder local to me offering 4.99% financing. 
my question is how or who can offer financing like this on houses I build ? I am guessing there is either a preferred or in house lender with large amounts of credit to get to this? 

I want to learn more. 4.99% for buyers is a game changer selling 6 new construction houses 

[Jay Hurst]

Quote from @Connor Williams:

I saw another builder local to me offering 4.99% financing. 
my question is how or who can offer financing like this on houses I build ? I am guessing there is either a preferred or in house lender with large amounts of credit to get to this? 

I want to learn more. 4.99% for buyers is a game changer selling 6 new construction houses 

 You just buy down the rate for the buyer. The cost to do this just comes out of the total profit margin. 

[Patrick Roberts]

As Jay said, the rate is bought down by seller credits from the builder. Generally, the builder will also own the mortgage company to recover some of what they give up in credits via the profit on the loan. 

[Andrew Postell]

@Connor Williams yeah, what the above posts stated but it's formally called "Forward Commitment" when a builder does it (if you want to google more on it).  So, you, as an individual, may not get to the same rate that a MASSIVE national builder can...but you can certainly offer credits to the buyers to help buy down the rates.  The loan programs of your buyers will dictate how much of a credit you are allowed to apply to their closing but it certainly helps to move inventory when you offer an incentive. 

Hope all of that makes sense.

[Connor Williams]

Thanks for the confirmation everyone. Definitely what I was thinking and sounds like it can be done. 5.25-% rate on a 1.2$ house is definitely more appealing and opens doors up as opposed to 6.7+ rates. 

[Derek Brickley]

Yep very possible, that's not to say lenders don't contribute towards that buydown too.  Depending on the price range we generally offer $2,500 towards cost/buydowns for a preferred builder partners but our partners generally match that if not greater than. 

[Jay Hurst]

Quote from @Connor Williams:

Thanks for the confirmation everyone. Definitely what I was thinking and sounds like it can be done. 5.25-% rate on a 1.2$ house is definitely more appealing and opens doors up as opposed to 6.7+ rates. 

 Sure, it can be done. But, understand the cost involved. Assuming your buyer has good credit, putting 20% down etc buying down to 5.25% today would cost 4-4.5 points, so 800k loan that would be 32k-40k from someone, and if you are offering that buy down that someone would be you.