Construction Loan Question

Hi Jen,

Welcome to the board.

What do ya say we start on a campaign to boost your scores up to about 680 before you even apply.

Hey I'm an immediate gratification American just like you but the short delay would be well worth it.

???

 

Sure,

I began about a year ago at 650. I was at 780 5 months later on ALL 3 reports.


But it all depends upon your situation of course. The more derog you have the longer it may take. Almost none of us have taken longer than a year tho.

It's just that when you apply an inquiry gets made on your report and is visable to other creditors. Stays for 2 years. So the important thing is to be in a position where you'd be approved, since it's going to be on there anyway. If a prospective creditor sees the inquiry without a corresponding account it hurts you.

They see that you've been denied.

So the smartest thing to do is "take it on the chin" for a few months, bear down on this and fix some stuff first. Raise the level of approval from possibility to probability.

Begin by reading the "INTRO" posts at the top of the first panel. It'll give you a great background.

We'll work with ya. But you'll need to be patient. This is the smartest way to go, but yeah, we know it hurts to be patient.

 

a year... well, maybe. I have been working on my credit for over a year, raised from the 550s to 620-670 on all reports, but I still have more negatives to take care of. Don't get me wrong, I'm THRILLED with the score increase, but it frequently takes more than a year for a totally clean report and 700 scores. Not to discourage you at all, my most signficant increases came within the first 6 months. Just thinking out loud

 

how hard is it to get a construction loan and what percent do they run at?
The wife and I are going to build us a new home in about a year. We haven't lloked into the loans or the process of the loans. I know everything about the building process but not the money side.

Did you design your own home or did you choose a home the builder has? We designed our own and we are going to take it to an architect to have it blueprinted for construction. We are going to sper it ourselves because I have the right people helping which will cut the cost tremendously. I'm not sure how much the architect charges. If you know please tell..

 

This might be of interst to others looking at construction loans --

one of the builders we are looking at had some financial information available at the model ...

middle score of 620 will get you 100 percent financing.

middle score of 580 and you will have to pay an additional $1,000.

I don't know about their corresponding rates, but I was pleased to see that a 580 middle score would qualify.


peace,
delilah

 

EQ of 247... impossible..


you must have meant something else,.

 

I am a commercial appraiser who has done quite a bit of construction lending work, thus I can add a little perspective on why homes, contsruction and land loans are underwritten very differently.

If I am just stating the obvious, sorry!

1) Home loans usually have federal guarantees and/or private mortgage insurance.

2) If the lender on a home needs the cash back for reserves or to make new loans, they can sell your paper. Lenders generally make the most on the origination and servicing of the loan. After that it gets pooled and sold off as mortgage backed securities, or some other instrument.

3) Land and construction paper will generally be on a lender's books until the loan is paid. They are not generally pooled and sold off. If they were, there would be a substantial discount!

4) Residential land is just that... and is totally unusable (except for a tent) until there is a building on it. If the bank should end up owning it, they would likely have to take a bath on it to sell it quickly to a developer who has very different land purchase priceing criterion than does an end-user.

5) Construction loans are based on a proposed value at the end of construction. If you were to stop construction and servicing the loan, they are stuck with a real problem!

Example:
Let's say the loan amount is $100,000 and the land is worth $30,000 and the prospective value is $150,000 at the completion of construction. You've spent $75,000 in construction costs and stopped paying everybody.

Believe me, the completion costs at this point are not just the remaining $25,000. The bank would have to foreclose on the property, have appraisals done, plan checks, possibly redesign, and so on. So, let's assume the remaining costs double to $50,000, which is probably very conservative.

Now they have a prospective house worth $150,000 after they have put... $125,000 into it. The land is included in this amount. This is why lenders generall won't include the land as construction loan equity.

Then they get to pay 5-6% to real estate agents to get rid of the house they completed... After administrative costs are counted, they lost money on the deal and a few people got fired!

Just my $0.02 on issues related to construction financing!