New Construction
What are builder incentives really, and what are they actually worth?
By Steve Lockhart
The short answer
A builder incentive is a discount delivered in a form the builder controls. The most common are closing cost credits, mortgage rate buydowns, design center dollars, appliance packages, or an amount applied to your lot premium.
Full answer
A builder incentive is a discount delivered in a form the builder controls. The most common are closing cost credits, mortgage rate buydowns, design center dollars, appliance packages, or an amount applied to your lot premium. They are not fake, and they can be worth real money, but they are typically tied to using the builder's affiliated lender, title company, or closing timeline.
The value shows up in the comparison. A rate buydown from the builder's lender sounds great until you see the rate, points, and fees your own lender can offer for the same loan. Sometimes the builder's lender wins, especially when the credit is large. Sometimes it does not. The only way to know is to get a Loan Estimate from both and lay them side by side.
Also read when the incentive appears. Some credits are shown on the sales sheet as if they apply to any buyer, others are only for homes in a specific phase or must be used by a closing deadline. Ask what changes if the build runs late, because incentive deadlines and construction delays do not always move together.
Go a little deeper
Frequently asked
Questions people often follow up on
Are builder incentives negotiable?
Often, within limits that change with market conditions. In a slower phase you may trade a closing cost credit for upgrades or negotiate the design center amount. What matters is the total value, not the headline, so I help clients price the whole package rather than the sticker.
Can I use my own lender and still get the incentive?
Sometimes, but usually the largest incentives are conditioned on using the builder's affiliated lender. If you use your own lender you may get a smaller credit or none. Price both paths completely before choosing, because a slightly higher rate with a big credit can beat a lower rate with none.
What is a rate buydown and how does it work?
A buydown uses money, often from the builder, to lower your mortgage rate, either for the life of the loan or for the first year or two. A temporary buydown lowers the payment early and steps up later. Your real payment is the stepped-up one, so understand the full schedule before you budget to it.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: price the whole package before you sign anything. I take the builder's incentive sheet and the lender's numbers and put them next to your own lender's quote, so a credit is compared as real money, not as a reason to stop shopping.
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