Should You Use the Sponsor's Preferred Lender for a New Condo?
Summary: Most new NYC condos come with a lender the developer recommends. We read the offering plans to see who those lenders are, and how picking one can change your mortgage contingency.
When you buy in a new development, the sales office will almost always hand you a lender's card. That lender is the sponsor's preferred lender: a bank or mortgage broker the developer names in the offering plan and recommends to buyers. We read the purchaser financing sections of NYC condo offering plans and found a named preferred lender in 281 of them.
Who NYC Condo Sponsors Recommend
We found 31 different lenders. Two of them dominate: U.S. Bank is named in 90 plans and Wells Fargo in 81. Together they account for 50% of all the lender names we found.
| Lender | Offering plans naming it |
|---|---|
| U.S. Bank | 90 |
| Wells Fargo | 81 |
| loanDepot | 28 |
| Popular Bank | 21 |
| ABC Mortgage Corp | 20 |
| Citizens Bank | 16 |
| CrossCountry Mortgage | 12 |
| First Meridian Mortgage | 9 |
| TD Bank | 7 |
| Guaranteed Rate | 6 |
Most buildings name just one lender (84% of plans), and 46 name two or more. The arrangement is most common in smaller Brooklyn new developments, which make up 84% of the plans that name one. It's also recent: 80% of these plans were accepted for filing in 2020 or later. See every lender and the buildings it works with on our Buyer's Lenders page.
Why a Preferred Lender Can Make a New Construction Loan Easier
The lender already knows the building. Before a bank lends on a condo, it reviews the building itself: the budget, the reserve fund, the sales so far, and how many units will be owner-occupied. In a new development, many lenders won't lend until enough units are sold. A preferred lender has often done that review with the sponsor before you walk in. 19 plans say so outright. One reads: "The Condominium complies with the Sponsor’s Preferred Lender’s requirements applicable to condominiums" (CD200274, p. 93).
Your mortgage contingency may depend on it. A mortgage contingency lets you cancel and get your deposit back if your loan falls through. In 213 of the 281 plans (76%), the contingency is offered through the sponsor's lender. Some plans put it bluntly: "In the event a Purchaser uses a lender other than the Sponsor Designated Lender, no financing contingency will apply to the Purchase Agreement" (CD100178, p. 67). Another says: "Purchaser will not be entitled to a mortgage contingency unless Purchaser applies to a Preferred Lender" (CD190247, p. 73).
| Mortgage contingency through the sponsor's lender | 213 |
|---|---|
| Plan says the condo meets the lender's requirements | 19 |
| Lender needs a share of units sold or owner-occupied | 51 |
Counts of offering plans. A plan can say more than one of these.
Some lenders need the building to sell first. In 51 plans, the preferred lender won't close loans until a minimum share of units is sold, or caps how many units can go to investors. If the building is selling slowly, that can delay your closing even with an approved loan.
What to Ask Before You Use the Sponsor's Lender
- Is the contingency tied to this lender? Read the financing section of the offering plan, or ask your attorney. If you go elsewhere, you may be buying without a way out if the loan fails.
- Is the rate competitive? Using the preferred lender is your choice. Get at least one outside quote and compare the rate, points and lender fees.
- Has the lender approved the building? Ask whether the review is done and whether it depends on presales or owner-occupancy.
- Does the sponsor have a stake? Some plans say whether the sponsor or its attorney has an interest in the lender. Check the plan, and ask.
You can look up any building's offering plan and its sponsor's team on The Condo Book Project. For closing costs that come with a new condo, see what buyers pay at closing.
FAQ
Do I have to use the sponsor's preferred lender?
No. You can finance with any lender. But in many new NYC condos, the mortgage contingency in the purchase agreement is offered through the sponsor's lender, and some plans give no contingency at all if you go elsewhere.
Why would a preferred lender be easier for new construction?
Lenders review a condo building before they lend in it, and new buildings often fall short of standard rules until enough units sell. A preferred lender has often reviewed the building with the sponsor already, so your application doesn't wait on that.
Where do I find the preferred lender for a building?
It's in the offering plan, usually in the special risks, the financing section or a rider to the purchase agreement. Our Buyer's Lenders page lists the lender each building names.
How we counted: we searched the text of NYC condominium offering plans for the sponsor's preferred, designated, approved or participating lender (509 plans use one of these terms) and kept the plans that name a lender, leaving out banks named only as the escrow agent, construction lender or insurance trustee. Quotes are verbatim from the cited plan page.
Related: The Sponsor's Condo-Creation Fee in NYC · How Long Do New Condo Buyers Keep Their Homes, and What Do They Sell For?