Monday, September 24, 2012
Home NVR Mortgage - Bait & Switch
NVR Mortgage - Bait & SwitchIs 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:
|Adj Pruchase Price||$372,603.00||$387,293.00|
|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|
|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...
THERE IS NO INCENTIVE!
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.