Are Housing Freebies Really Free?


The housing market has been making positive strides over the last year, but with rising mortgage rates and higher prices, some are worried about maintaining the market. To attract new buyers, some home builders have started to offer cash incentives, upgrades and mortgage perks. Don Frommeyer, housing market expert and president of the Association of Mortgage Professionals (NAMB), offers his insights with a cautionary tone for potential home buyers.

“Monetary incentives and physical perks are very appealing to the customer. Who doesn’t want free appliances or part of their down payment covered?” says Frommeyer. “However, you have to make sure these costs aren’t being hidden elsewhere in the mortgage contract.”

According to Frommeyer, home builders can work directly with banks and loan institutions to move costs and fees. For example, banks and home builders often promote mortgages without any closing fees. While this seems like a great steal for home buyers, in reality the bank most likely increased the interest rate to cover the closing cost and in the end the home buyer will pay much more over the course of the mortgage. Alternatively, through federal regulations mortgage brokers must directly disclose of every fee and cost.

“There are closing costs on every loan and someone has to pay them, it’s just a matter of who is paying them and where the money is coming from. Mortgage brokers don’t have the capability to remove closing fees and rearrange costs elsewhere in the contract, which gives the impression that our loans are more expensive,” continues Frommeyer. “While upfront this may hold some truth, there are no hidden costs with a mortgage broker and in the long run home buyers end up saving thousands of dollars.”

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