Being Steered By Home Builder To Preferred Mortgage Lenders

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Buying a brand-new home is exciting. It’s shiny, fresh, and built just for you. But sometimes, something strange happens. Your home builder might insist you use their lender. If you’re feeling pressured or stuck, you’re not alone. Being steered by home builder to preferred mortgage lenders happens to many homebuyers. But what does it mean, is it legal, and what can you do about it?

In this guide, you’ll learn exactly what being steered by home builder to preferred mortgage lenders means, the good and bad sides, and your rights as a homebuyer. Plus, I’ll share the most recent updates on builder steering practices in 2024 and tips on how you can protect yourself.

What Does Being Steered By Home Builder Mean?

Being steered by home builder to preferred mortgage lenders means your builder strongly encourages or even pressures you to get your home loan through their lender. Home builders often have “preferred lenders,” which means they have an established relationship. This isn’t always bad, but it can limit your options.

Sometimes builders say you’ll lose discounts, upgrades, or special incentives if you don’t use their lender. This can make you feel like you’re being forced into a decision you wouldn’t make otherwise.

I know exactly how you feel because it happened to me. When I bought a home from Ryland Homes, the builder pushed me hard to use their lender. Even though I already had a loan officer ready to go, Ryland Homes told me the price of my new home would go up if I didn’t use their lender.

This was my first experience with being steered by home builder to preferred mortgage lenders, and it felt unfair and stressful.

Is Being Steered by Home Builder to Preferred Mortgage Lenders Legal?

You might wonder if builders can legally pressure you into using their lenders. The answer is tricky: steering itself isn’t always illegal, but builders cannot legally force you to use their lender. Under the Real Estate Settlement Procedures Act (RESPA), builders can recommend lenders, but they are not permitted to require you to complete your loan with those lenders.

However, builders can legally ask you to get pre-approved by their lender to make sure you can afford the home. But they can’t punish you financially or raise prices if you choose another lender. Doing that crosses the line and could break consumer protection laws.

Why Do Builders Steer Buyers to Their Preferred Lenders?

Builders steer buyers toward preferred lenders because it benefits them financially. The builder often gets a financial incentive or kickback when buyers use their preferred lenders. Sometimes, the builder owns part of the lender, so they make extra money from your loan.

Also, builders like controlling the mortgage process. They worry you might not close if you use an outside lender, which costs them money and time. Their preferred lender might be more willing to approve tricky loans—even if it’s not the best deal for you—because the builder’s profit can cover potential losses.

Being steered by home builder to preferred mortgage lenders often benefits builders more than buyers.

My Personal Story: Being Steered By Ryland Homes

Back in 2014, I bought a home from Ryland Homes. I already had a pre-approval from a trusted lender named Gustan Cho. My situation was complicated, but Gustan Cho was confident we could close on time.

When it came time to sign the paperwork, Ryland’s sales rep said I’d lose thousands of dollars in upgrades if I didn’t use their preferred lender. I felt trapped and forced to apply with their lender, even though Gustan Cho of Mortgage Lenders For Bad Credit, Inc. had already worked hard on my file.

Weeks passed, and the builder’s preferred lender kept delaying approval. I constantly emailed and called, but they kept saying, “Underwriting is working on it.” Eventually, with my closing date approaching fast, their lender told me in two short sentences that they couldn’t approve my loan.

After weeks of frustration, stress, and wasted time, Gustan Cho stepped back in. Within days, my file was moving quickly again. Gustan Cho got me the clear to close, and we closed on time with zero issues. Being steered by home builder to preferred mortgage lenders nearly cost me my new home, but having the right lender saved me.

Recent Updates: What’s Happening in 2025?

In 2025, regulators are more aware of the dangers of builder steering. The Consumer Financial Protection Bureau (CFPB) and HUD continue closely watching builders who unfairly pressure buyers. Several home builders have faced lawsuits or investigations for these practices.

Federal rules like RESPA (Real Estate Settlement Procedures Act) clearly state that kickbacks, hidden incentives, or forcing buyers into a specific lender are illegal. But some builders still find subtle ways around it, making homebuyers confused or nervous.

If you feel stuck because your builder is steering you to their lender, you now have more consumer protections than ever before. State and federal laws strongly discourage these practices; you can complain or even pursue legal action.

What to Do If You’re Being Steered By a Home Builder to Preferred Mortgage Lenders

It can feel confusing if you think you are being steered by home builder to use preferred mortgage lenders. Here are some easy steps you can take to help you:

Step 1: Understand Your Rights

• Remember, no builder can force you to use their lender.
• Builders can’t legally increase your home price just because you pick another lender.

Step 2: Get Written Agreements

Make sure everything is in writing. If the builder says you’ll lose discounts, ask them to put it in writing. They usually won’t because they know it’s illegal.

Step 3: Shop Around Anyway

Always talk to at least two or three lenders. Even if your builder’s lender seems easy, an outside lender might give you a better rate or lower fees.

Step 4: Stand Your Ground

If the builder pressures you too hard, remind them politely that you understand your legal rights. Mentioning RESPA laws usually stops builders from pushing further.

What to Do If You’ve Already Been Steered by Home Builder to Preferred Mortgage Lenders?

If you already started the process with a builder’s lender and realize it isn’t working out, don’t panic. You have the right to switch lenders anytime before closing.

• Tell your builder you’ll close with another lender.
• Contact an experienced lender (like Gustan Cho Associates) who can quickly get your loan back on track.
• File a complaint if you think your builder or lender broke any rules.

Can Preferred Lenders Be Good?

Not all builders are unethical. Sometimes, using a preferred lender makes sense. Preferred lenders might offer lower rates, faster closings, or other perks. Always check carefully and compare their offer to another lender’s rates and terms. You should always shop around.

But if you feel pressure or lose discounts by choosing your own lender, that’s a red flag.

Bottom Line on Being Steered by Home Builder to Preferred Mortgage Lenders

Being steered by home builder to preferred mortgage lenders can feel overwhelming, unfair, and confusing. But remember, you always have a choice. You have rights as a consumer to shop freely without penalties or unfair practices from builders.

Never feel stuck. Great mortgage companies like Gustan Cho Associates have experience dealing with builders who try to steer homebuyers. They will make sure your rights are protected, and you get the best possible loan.

You worked hard for your new home. Don’t let builder steering take advantage of you.

Need help now? Contact Gustan Cho Associates anytime, and we’ll guide you through the home-buying maze stress-free.

You deserve transparency, fairness, and respect. We’re here to make sure you get it.

Frequently Asked Questions About Being Steered by Home Builder:

Q: What does being steered by home builder mean?

A: It means your builder strongly pushes or pressures you to use their preferred mortgage lender instead of choosing your own.

Q: Is being steered by home builder legal?

A: Builders can recommend lenders, but they cannot legally force you to close your loan with their lender.

Q: Can a builder raise my home price if I don’t use their lender?

A: No, builders cannot punish you financially or raise your price for choosing your own lender.

Q: Why do home builders steer buyers to specific lenders?

A: Builders steer buyers because they usually make extra money or control the sale better when buyers use their preferred lender.

Q: What should I do if I feel I am being steered by home builder?

A: You should get everything in writing, shop around with other lenders, and remind the builder politely that you understand your rights.

Q: Can I switch lenders if I already started with the builder’s lender?

Yes, you can switch lenders anytime before your loan closes. You’re never stuck with the builder’s lender.

Q: Are there any good reasons to use a builder’s preferred lender?

A: Sometimes, preferred lenders offer better deals, discounts, or faster closings. Always compare with other lenders first.

Q: What if my builder refuses to give me the promised discounts?

A: Ask them to put their refusal in writing. Builders usually won’t because taking away discounts when using your own lender is illegal.

Q: How can Gustan Cho Associates help if I’m being steered by home builder?

A: Gustan Cho Associates understands how builder steering works. They protect your rights and help you get the best loan without pressure.

Q: Who should I contact if my builder breaks the law by steering me?

A: You can contact consumer protection groups, such as the CFPB, or consult a knowledgeable mortgage professional, like Gustan Cho Associates, for guidance.

This blog about “Being Steered By Home Builder To Preferred Mortgage Lenders” was updated on March 7th, 2025.