Builders Locking In Mortgage Money

Many home builders are already locking in mortgage money at today’s rate for extended periods.

One builder with subdivisions in Colorado and Nevada just paid a major lender $50,000 up front to guarantee $10-million worth of financing for his future buyers--$6 million for six months, $2 million more for nine months and another $2 million for 12 months, all at today’s rates.

“We’re getting tons of requests for bulk forward commitments, some out as far as 14 months,” said Kitty George, national accounts manager for Countrywide Home Loans in Denver. “Builders are buying today’s dollars for tomorrow’s customers.”

Forward commitments aren’t cheap. They account for one-quarter to one percentage point of the loan amount, depending on the length of the obligation. But they’re somewhat less expensive than buy-downs.