construction loan (credit score, rate, refinance, bank)

[Keith G]

Anybody know any lenders doing construction loans? I'm a FL. M.B. & have a client who owns 21/2 acres and wants to build a home on it---himself---not through a builder. He's got 650 FICO and he and his wife got 90 K yearly income but---so far---I can't find a lender doing these loans.

Keith G.

[Grainraiser]

I work for a major bank in the construction lending department and I tell you they will not bite on a client who has a 650 credit score. His only chance is to have a construction background and have plenty of money in reserves. I have a desk full of loans were folks started building their own home only to find out latter they are way over their heads. Construction loans have become very tight because of the market.

Reggie

[annerk]

Suntrust was doing a lot of construction to perm loans at one point, although I agree, I think that the 650 FICO might be a problem.

[chet everett]

The other thing that is going to hurt this guy is having 2 1/2 acres -- if that can be subdivided and THAT is another red flag for lenders. If they wanted to underwrite a DEVELOPER that is a business loan, not a mortgage. Of course if he has a relationship with a bank that understood this is just going to be a "homestead" he might get somewhere. Maybe even inquire with a county agriculture office -- there are still some farmer coops that do that sort of loan.

[Keith G]

Thanks for the input guys; I'm still working on the loan, so far one lender out of Michigan is giving it a look but it don't look very promising. The 21/2 acres is actually split from 5 acres and won't subdivide further. Suntrust and all the rest are passing it by mostly because the borrowers can't actually prove that they have any experience building a house, even though they insist they can and will do it.

Keith G.

[ShanetheMortgageMan]

With no experience I don't know any lender who'd just give some random land owners money to use how they see fit. Would you?

[annerk]

Originally Posted by Keith G

Thanks for the input guys; I'm still working on the loan, so far one lender out of Michigan is giving it a look but it don't look very promising. The 21/2 acres is actually split from 5 acres and won't subdivide further. Suntrust and all the rest are passing it by mostly because the borrowers can't actually prove that they have any experience building a house, even though they insist they can and will do it.

Keith G.

Between the lack of experience and marginal credit score, if I were a lender I'd most likely pass as well. Sorry.

[Keith G]

Yeah,

You're probably both right but I just got a tip on a company, aptly named Construction Loan Company, CLC, out of Howell, Michigan, who does only construction loans. A slew of paperwork and they limit me to 1.5% fee; they obviously get any and all yield spread, but I got no other takers and am just wondering if it's gonna be worth my time and effort if it ain't gonna fly anyway. They're doing a one loan close, meaning they're gonna close it before building starts, then refi them. They pay interest only until the refi. Of course, I'll be out of any of that, I just don't want to take any heat if they run into problems, as I live a couple blocks away from them and am selling their parents' home. It's gotta go through FNMA's D.O. and their D.U. so I know it's gonna take forever too. Anyone heard of this company CLC?

Keith G.

[brokerdave]

like i said in the other post, i've used them. remember you can refinance them 6 months after closing if the rate they end up with isn't that good. another thing to note, is the interest only payments are based on the amount of the current balance drawn. so the payment will progressively go up.

that is why its called construction to permanent. its a construction loan that turns into a permanent loan at closing.

keep us updated, i am curious to know how the construction rates at at this point.