A surprising trend is emerging in today’s high-interest-rate housing market—homebuilders are offering huge incentives to attract buyers. These perks range from seller-paid closing costs and price reductions to luxury upgrades like finished basements and free decks.
But why are builders offering so many incentives, and how can they afford to do this? More importantly, is it legal? Let’s take a closer look at what’s happening.
Why Are Homebuilders Offering These Incentives?
Despite mortgage rates reaching a 20-year high, new home construction is still in demand. However, many buyers are struggling to qualify for financing due to tighter lending requirements.
1. Builders Want More Control Over the Loan Process
A major reason for these incentives is that builders want to ensure financing doesn’t fall through. Many buyers face stricter loan approvals, and builders know that without a solid mortgage, the sale could collapse at the last minute.
Instead of relying on third-party lenders, many large homebuilders now offer in-house mortgage affiliates. These builder-affiliated lenders allow them to:
- Control the financing process, reducing uncertainty.
- Offer special rates and incentives, making homeownership more affordable.
- Ensure buyers qualify, preventing last-minute loan denials.
For homebuilders, the strategy is clear—losing a little on mortgage incentives is better than losing a home sale entirely.
Compare mortgage options and builder incentives with our Loan Compass Tool.
What Kinds of Incentives Are Builders Offering?
Homebuyers who use a builder’s preferred lender may receive major financial perks, including:
- Seller-Paid Closing Costs – Some builders cover all closing costs, making it easier for buyers to afford a home.
- Price Reductions – Direct price cuts help offset higher mortgage rates.
- Luxury Upgrades – Free decks, appliances, smart home packages, or finished basements add extra value.
- Special Mortgage Rates – Builder-affiliated lenders may offer lower rates than traditional lenders.
These incentives can make a big difference, especially in today’s market where affordability is a major concern.
Wondering how builder incentives affect your home budget? Use our Loan Affordability Calculator to explore options.
Are These Builder Incentives Legal?
A common concern among buyers is whether these Big Builders Offer Major Incentives to Homebuyers
1. Does This Count as Steering?
“Steering” occurs when real estate agents or lenders push buyers toward a specific lender in exchange for a kickback. This is illegal under RESPA.
However, in this case, the builder is the seller. Sellers have the legal right to offer financial incentives for using their preferred lender. Since builders are not third-party agents, these incentives do not violate RESPA.
2. Is There a Catch?
While these deals are legal, buyers should still carefully review the loan terms. Some builder-affiliated lenders charge higher fees or less competitive rates.
Before committing, compare the builder’s mortgage terms to other lenders to ensure you’re getting the best deal.
Check if builder mortgage deals are competitive using our Loan Watch Tool.
Is It Worth Taking a Builder Incentive?
For many buyers, these builder incentives can be a great deal, but there are a few things to consider before deciding.
When a Builder Incentive Makes Sense:
- You need help covering closing costs.
- The mortgage rate is lower than what other lenders offer.
- You want free upgrades that add value to the home.
When You Should Be Cautious:
- The interest rate is higher than what’s available elsewhere.
- There are hidden fees or unfavorable loan terms.
- You feel pressured to use the builder’s lender without comparing options.
Pro Tip: Always compare builder financing to outside lenders. Even if a builder offers perks, the overall loan terms must be favorable.
Learn more about builder-affiliated lenders in our Mortgage Knowledge Hub.
The Bottom Line
Despite high mortgage rates, builders are using major incentives to keep sales moving. These perks, including seller-paid closing costs, price reductions, and free home upgrades, help buyers afford homes in a challenging market.
- Builders use in-house mortgage affiliates to streamline the loan process.
- These incentives are legal, as the builder is the seller.
- Buyers should compare loan terms carefully to ensure they’re getting the best deal.
Before committing, compare mortgage rates, fees, and incentives to find the best financing option.
Explore builder mortgage offers with our Loan Compass Tool and Loan Watch Tool.
