Megan Campbell was the kind of prospective buyer most home builders turn away.
The 28-year-old single mother's credit score dipped into the 500s from erroneous or unpaid utility bills. And her tip-heavy income as a server at Cheddar's Casual Cafe didn't convince lenders she could handle a big loan.
But in February, Campbell enrolled in a counseling program with Lennar, called "Project Dream Home" that the builder said could get her finances back on track.
Within five months, her FICO credit score jumped nearly 40 points to 621, allowing her to qualify for an $83,000 mortgage from the builder's in-house lender.
She left her Brandon apartment for a four-bedroom townhome in Lakeland's Autumnwood Grove subdivision. The builder paid all closing costs, and she moved in with only $500 down.
"They did everything they could to make this possible for me," Campbell said. "Who gets into a home for $500, a brand new home at that?"
Campbell's "miracle" loan, as she called it, came from the work of a growing program offered by big builders: free financial counseling and credit help for buyers struggling to secure a loan.
Some of Tampa Bay's biggest-selling builders, including Lennar, Taylor Morrison, D.R. Horton and Pulte Homes, all offer similar programs intended to seal deals with prospective buyers they would otherwise leave behind.
Builders said their credit "coaches," "counselors" or "advocates" help participants navigate credit roadblocks and lending standards that remain stubbornly high.
Demand for mortgages has grown in the last six months, according to a Federal Reserve survey of senior lending officers released Wednesday, but many banks remain leery of handing out new mortgages, a frustration builders say they're helping buyers to avoid.
Many program participants, counselors said, are first-time buyers worried about qualifying or former homeowners burned by foreclosures or short sales. Some builders credit the programs' growth with an uptick in new-home sales.
"This was a part of the market that was there, in our face, that we didn't know what to do with," said Dave Parker, Lennar's Central Florida director of sales and marketing.
"If they go the normal way of trying to do it themselves, they get frustrated and give up. We help those individuals who don't understand how to help themselves."
But consumer advocates said the programs should raise red flags for eager buyers, who could be guided into unclear deals with little regard for their personal finances.
"Graduates" of the programs are offered loans with the builders' in-house mortgage arms. Many of those loans are government-insured, leaving taxpayers with the bill if buyers default.
"There's no getting around that there is a potential conflict of interest between wanting to sell a house and trying to give someone the best financial advice," said Kathleen Day, a spokeswoman for the nonpartisan Center for Responsible Lending.
"They're trying to sell you something at the same time they're trying to tell you what to do," Day added. "People should go to professional counselors, someone who doesn't have a dog in the fight."
To enroll in the builders' programs, prospective buyers must meet income requirements and submit to counselors financial documents such as tax returns, bank statements and pay stubs.
Improving credit can take several months as counselors hunt down errors in credit reports or instruct buyers on which debts to pay down. Some counselors said they go a step further toward building good credit by helping buyers sign up for new credit cards.
The programs have been a dream for builders still convalescing from the housing bust, and builders predict the programs will bloom as new-home sales recover.
Members in Pulte's Mortgage Financing Advisor service, which launched this spring, bought homes at twice the rate of buyers outside the program, spokeswoman Valerie Dolenga said.
Lennar's program has led to more than 300 home sales for the builder between Tampa and Orlando since 2009, program director Ben Goldstein said. In three years, the program's contribution to Central Florida sales has grown from 5 percent a year to 13 percent.
And Taylor Morrison has seen nearly $50 million from 163 homes closed or placed under contract by graduates of its Able Ready Own program this year nationwide, revenue the builder could have potentially left behind.
"With the green shoots of the economy starting to come in," Taylor Morrison Home Funding vice president Laura Kunzweiler said, "folks are feeling better and more confident about buying homes. … They just need a little coaching on what to do with their credit scenario to help them qualify."
But consumer advocates argue the benefits of these credit-help programs often slant deeply in the builders' favor, with extra costs for buyers buried in the price of the home.
In handing freshly vetted buyers to their in-house mortgage companies, builders or lenders can "bundle" in fees, including costs for the financial counseling, into the sale or loan.
And because buyers mostly enroll in programs with a single builder, participants might trust the counselor's guidance without shopping around — even if the builder's competitor could offer a better deal.
"This question of bundled services is just fraught with danger, because it can be abused and can lead to a lack of transparency," said Barry Zigas, the director of housing policy for the Consumer Federation of America.
"Consumers need to be very cautious," he added. "The person on the other side of the table is interested first and foremost with what they get out of it."
Independent housing counselors, advocates said, offer the best chance at unblemished advice. Groups like Home Now, a partnership of nonprofit counselors and mortgage companies, offer a hotline for prospective buyers seeking free and federally certified credit counselors.
"These new borrowers are likely not being counseled on how to shop for the best loan, or how to protect themselves in what is likely the most complex and risky of all residential purchases — new construction," Doug Miller, the executive director of Consumer Advocates in American Real Estate, wrote in an email to the Tampa Bay Times.
"They are being funneled into the builders' overpriced mortgage and title companies, where they will be stripped of all the safeguards that comes with independent providers, and they will likely pay a lot more than they should for those services."
Builders defend their rates as competitive, and say participants leave the programs with better credit even if they back out of the sale.
Buyers' mortgages, they add, are far different from the risky subprime loans that contributed to the housing bust due to tighter mortgage standards.
But builders could not detail the program's strength of loan repayment, either because the programs are young or because they don't track participants' defaults.
"If somebody defaults on a mortgage coming out of this program … that's out of our control," said Dave Parker of Lennar, which does not track graduates' default rates. "Once they own a home, they are a homeowner with specific responsibilities."
As for Megan Campbell, she believes that without the help of her "Dream Home Advisor" getting her a 30-year mortgage, with interest at 4 percent, she would still be renting in Brandon at a price nearly $300 higher than her $620 mortgage payment.
Outside of her mortgage, Lennar counselors also helped her earn the $7,500 first-time home buyer tax credit and paid all closing costs. Now studying to become a paralegal, she calls the program a "great blessing," and one in which her parents also recently enrolled.
As for the builder, Campbell said, "It was more about getting me into a home that was good for us, versus just them making a lot more money."
Contact Drew Harwell at (727) 893-8252 or [email protected]