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Monday, September 24, 2012

NVR Mortgage - Bait & Switch

Is the NVR Utilization Incentive a rip-off?

Anyone looking to purchase a new home through Ryan Homes is almost certain to be enticed by seemingly large discounts with the contingency you use their in-house mortgage service NVR-M.  Your Sales Rep and Loan Officer will tell you not only are you getting a great deal, instant equity, yada yada, but you'll "enjoy the convenience of having a one-stop shop."

Let's review the Ryan Homes - Homeowner's Guide.

Chapter 3, Arranging Your Loan with NVRM, Page 18, the fine print, at the bottom:

Note: Using NVR Mortgage Finance, Inc. for the financing of your home is not a condition or requirement for purchasing a home from Ryan Homes, but as your Purchase Agreement makes clear there may be certain incentives tied to the use of NVR Mortgage Finance, Inc.  Subject to the possible loss of those incentives, you are free to select a mortgage lender of your choice for the financing of your new home.

Nice to know I have a choice!

Let's review more Ryan Homes - Homeowner's Guide.

Chapter 1, Introduction, Page 4:

Customers who choose NVR Mortgage enjoy competitive rates and a financing process that's simplified, streamlined and customized to suit their specific needs.

Is this true?  Is NVR Mortgage Finance, Inc. a truly competitive agency?  Let's evaluate.  First, I agree that buyers may run the gamut of finance scenarios, but to keep it simple, I'll use my scenario, which by my estimation is ordinary.  Credit score: 740, 20% down, stable job, some installment debt.

The day I went into meet with Chris McDonald to discuss my application for a loan, the most important concern I had was what will be my rate, and what are they charging for closing costs?  That day, checking the average rates in VA using Zillow.Com, I observed online quotes around 3.34% for a 30 year loan, and other conditions relevant to my needs.

Chris quoted me 3.625%.

Finally, just before leaving, Chris mentioned I would qualify for 3.5% if I brought my credit score up from 737, to 740.  OK, great, 3 points to go!  Before meeting with Chris, my SR estimated my closing costs in the realm of $10,000.  When I left my initial loan application meeting, my closing costs were almost $13,000.  Why does paper work cost $13,000?

Today, on Zillow, I observed rates as low as 3.14%.  Here are the screenshots to prove it.

Wow!  Those are some competitive rates!

So in discussion with NVR today over former concerns, I asked Shawn what their current rate was.  Shawn, bless her heart, was quite responsible in letting me know she wasn't legally able to offer a quote, but she'd pass it along to Chris to get back with me.  Here is Chris' response:

"Hey Todd.  Our rate today is 3.5% with no points or origination fee.  This is based on a credit score above 740.  Let me know if you have any questions.  Thank you very much."

So after a month+ of plunging rates, NVR hasn't budged, though I admit, no origination fee was special--at least for someone locking today.

More to the point, is NVR Utilization Incentive a rip-off?

Today, I put together something I should have done in the beginning.  I created a spreadsheet comparing NVR against Other.

Here's how NVR really stacks up against the competition:

NVR Other

Purchase Price
$387,293.00 $387,293.00
Utilization Discount
$14,690.00 $0.00
Adj Pruchase Price
$372,603.00 $387,293.00
Percent Down 20.00% $74,520.60 $77,458.60
Loan Amount
$298,082.40 $309,834.40
Interest Rate
3.50% 3.20%
Tax Rate
.95% .95%
Loan Duration (Years)
30.00 30.00
Total Interest Paid
$183,785.95 $172,540.58
Total Taxes Paid 0.95% $110,378.50 $110,378.50
Monthly Payment
$1,645.13 $1,646.54
Total Cost of Ownership
$592,246.85 $592,753.48

Wow!!! NVR really is competitive!  When I turn 70 years old, I will have saved $506.  That value today is about $220 of raw purchasing power.

The spreadsheet above shows that even with a $14,690 utilization incentive, with NVR's "competitive rates" the reality is...


As a result, what you are presumably saving at the onset of signing, you are actually losing in high rates and high closing costs.  This practice, for lack of a better term is Bait & Switch.

Best of luck in your Ryan Homes / NVR Mortgage Finance, Inc. negotiations!  And if you aren't getting at least $15,000 in incentives, then you better be shopping around.


  1. WOW! You really did your homework! My husband and I just met with Chris M this last week. I am definitely going to be pushing the incentives button. We are only getting around 10,000. Was the amount of your incentives based on the neighborhood in which you are building or the base cost of the house?

  2. My perception is that it varies by neighborhood, and varies by month. In August, my neighborhood was offering $14,500 for a free morning room and gourmet kitchen. Now, when I visit my SR, he's got $7,500 towards closing costs plastered all over his desk. It's also posted on their web site, what their incentives du jour are.

    Good luck with Chris! But be forewarned, you will be told that you will need Good Faith Estimates. Then, when you actually go out and get one, you will be told this:

    "Hey Todd. These are some unbelievable offers. Unfortunately, there is no way we can match these offers and honestly I am skeptical that this company can actually offer you these terms."

    So if NVR cannot match offers from other lenders, this means they not fulfilling their claim as a competitive lender. The above response was from my first attempt using Meyers Park, an online lender with very positive reviews.

    Today I am submitting a loan application with Wells Fargo, and I'll be submitting another with SunTrust.

    Having a couple other lenders in tote, will allow me the flexibility to exercise their offers at a time when it will be necessary to do so.

    From another point of view, looking at NVR Stock, at a WHOPPING $850 a share, and observing quite a profit through this so-called recession, means they are really great and people love them, or it means people are really naive and befuddled by a complex matrix of costs in which everyone is trying to get a piece of your American Pie.

  3. WOW! I need to study this material! Well thought out Isz!!

    1. What is the risk you are taking by applying for many loans at once, how is this affecting your credit score?

    2. At this point, my credit score has not changed, though I have seen documents stating "too many inquiries" as part of the reason for whatever I am not qualifying for. Contrary to my beliefs, I purchased a Score Watch, with Equifax. It says 65% of my score, supposedly, is based upon payment history and amount of debt. The lesser allocations, like length of credit history (15%), new credit lines (10%), and types of credit (10%), are nondescript, but if I had to guess, credit inquiries would fall into the 10% bucket and should have a negligible impact on one's score. In my opinion, seeking alternative lending should increase your score, since it shows your are diligent and concerned about getting the best rate, which implicitly means you are concerned about your debt. I'll post something though if I think my score has changed as a result of more inquiries, but I doubt it's going to.

      Equifax appears to be the most fascist of the three, but they seem to have the best interface for seeing your credit portfolio.

      Hope this helps!

  4. We, too, have been going rounds with NVR. We did get a competitive approval from Wells Fargo and brought it to our NVR lender. Her words were "wow, we can't touch that rate". Hmmmmm... But, she is trying to be competitive so they eliminated the origination fee and about $3600 in other costs to try and come close. For us, we will only live in this house for about 7 years so we are not looking at the 30 year mark for savings. We are looking at what is the best deal in a 10 year or less time frame. We did all the math, like you, which really is the best way to see the comps properly, and NVR comes out ahead by about $3000. We still haven't committed to them though, because we want them to WANT our business...meaning, see what else they might offer. As for the credit score, I have been told by various lenders over the years that if you are getting inquiries on the same loan within a reasonable timeframe, it doesn't affect your score. The problem is if you are getting inquiries on a variety of types of loans: mortgage, credit card, etc.
    I really hate the idea of "going to bed" with the NVR blanket of products. They are also trying to get us to use their insurance company for Homeowners Insurance. I am looking into my options there too. Any suggestions?

  5. Thank you for the clarity, and knowledge of Homeowners Insurance! It's good to know.

    Like many before, and I am sure many more to come (hopefully not), people will go to their first couple meetings sparked by the desire to have those extra nice, incentive-enticing items, while wondering if they're just ending up paying for them anyway. It's hard to see the stepping stones in a game this rigged, but it's clear now, responses like "wow, we can't touch that rate", or "Unfortunately, there is no way we can match these offers ..." are canned, if not rehearsed answers. Your NVR rep has heard these pleas before many times, so this kind of response will be effortless.

    My SR prides himself on a > 98% "Take Rate" (meaning he is claiming more than 98% of his customers end up using NVR). My interpretation of this is that when people end up realizing they are paying the same amount, and the process has unfolded too far down the project timeline (meaning the day after signing the purchase agreement), they throw their hands up in surrender and accept the deal NVR is waging.

    It should be COMPLETELY CLEAR to anyone reading this, no matter how much your SR or NVR tells you they are competitive, no matter how much they tell you that you will benefit from their "one-stop-shop", they are not acting for your welfare, nor altruistically helping you to reach your notion of an American dream. Only by reading commentary like this, or creating deals with alternate lenders like Wells Fargo, will the NVR scheme be broken, or shall I say, repaired into the promise they, at the onset, are claiming to make.

    Thanks for contributing!

  6. Isz, there're totally Baiting & Switching & doing some from of inside trading based on our experience with them. FIND YOURSELVES ANOTHER MORTGAGE COMPANY & save yourself the headaches & extra $.


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