Despite economic uncertainty in 2025, home prices are expected to continue slowly rising, and mortgage rates are likely to decline but remain above pre-pandemic levels. For builders facing hesitant buyers, the solution isn't slashing prices. It's using a strategy that benefits builders, buyers, and lenders alike.

A forward commitment, an agreement between a builder and a lender to provide loans to future homebuyers at below-market interest rates, providing a better alternative to price cuts. Cornerstone Capital Bank, a leader in builder partnerships with over two decades of experience, has been at the forefront of offering forward commitments to address affordability challenges.

What Are the Advantages of a Forward Commitment?

When a builder lowers rates instead of cutting prices, they provide a solution to the affordability hurdle holding many homebuyers back. For a $500,000 home, paying $27,000 for a forward commitment is the same as reducing the price $70,000 for a buyer to have the same principal and interest payment.* 

This approach works because:
  • It protects profits:  Builders can maintain their asking prices while spending significantly less on a forward commitment than they would on a price reduction.
  • It promotes affordability: A lower interest rate can reduce a buyer’s monthly payment more than a price cut would—often saving hundreds of dollars each month.
  • It qualifies more buyers: When monthly payments drop, more homebuyers can qualify for a mortgage, expanding a builder’s potential client base.
“What it does is open up the conversation for buyers who thought their monthly mortgage payments would be too expensive,” Lonnie Jenkins, VP of Cornerstone’s Builder Division, says. “Forward commitments are a great tool to stand out from the competition and make payments more affordable.”

Addressing Common Builder Concerns

Many builders worry about being locked into rate commitments while market conditions rapidly change, but forward commitments include protections:
  • Unused commitments: Cornerstone provides extensions for a nominal fee if homes don't sell within the original timeframe.
  • If rates fall: Cornerstone also includes a "float-down" feature, allowing adjustment to market changes.
How to Form a Lender Partnership

 Cornerstone offers flexible partnership models, from preferred lender agreements to full joint ventures, tailored to each builder’s needs and sales volume:
  • Preferred lender relationship: A basic formal partnership with minimal setup that offers access to a lender’s full array of products, operational excellence, and builder expertise; ideal for builders seeking an easy entry point.
  • Broker joint venture: A venture where a builder co-owns a mortgage company that originates and processes their homebuyers’ mortgages. A separate wholesale bank will fund and close the loan. 
  • Banker joint venture: The joint venture is responsible for the entirety of the mortgage from application through closing, allowing for seamless integration of the builder process within the JV.
When selecting a lender partner, look for a lender that has a strong track record with homebuilders. The ideal partner should understand your business model and have successfully implemented forward commitment programs with other builders. For example, Cornerstone has established itself as a trusted partner for builders, with decades of experience and more than 100 active partnerships.

“It can be really hard for builders to compete if they’re not leveraging all of the tools available to them, from forward commitments to strategic partnerships with a trusted lender,” Mike Iorio, SVP at Cornerstone, says.

By making monthly payments more manageable for buyers, forward commitments offer a proven strategy to sell homes without sacrificing profit. To take the first step, contact Cornerstone.

📧 Email: LJenkins@houseloan.com
📞 Phone: 303.513.1915

*Based on comparing a $70k price drop of a $500,000 purchase price at 6.5% v. spending $27k to buy down the interest rate to 4.99%. Actual rate, payment and costs may vary and are subject to change.

Sources deemed reliable but not guaranteed.