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Old 11-07-2009, 07:54 PM
 
2 posts, read 38,744 times
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We are expecting our third child and we are really trying to build onto our home. We have a very small 2 bedroom right now. We've been here since 2005, never had a late payment. What we have had is NO LUCK finding a loan to build onto our existing home.

Our credit score is around 700. Our home is worth about $100k and we're looking for about a $40k loan. (we're the tiniest home in the neighborhood by far.) we don't have much equity. We are revisiting this after talking to everyone in town about 6 months ago.

How can we get a loan for a simple home addition? We qualify for a mortgage 100 percent bigger, no problem! But that's not what we want. Ideas? Help!!
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Old 11-07-2009, 08:47 PM
 
Location: Chapel Hill, N.C.
36,484 posts, read 43,747,138 times
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have you gone to your original mortgage company? If you qualify for 100% bigger mortgage why on earth would you not get a 2nd mortgage? maybe not been employed long enough?I know credit is tight but I would sit down with my original mortgage broker and see what can be done. sometimes a face to face can get more done than a phone call. good luck.
If you are really that cramped you might just have to sell your current home and get that bigger home. seems like your price point home would be a desirable home sale and lord knows there are planty of homes on the market where you could get a good deal. Get that in paper if someone told you you could get 100% more mortgage. That ought to impress somebody. Or maybe if you both aren't employed you both should be just long enough to get that loan approved.
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Old 11-08-2009, 04:25 AM
 
20,793 posts, read 53,973,584 times
Reputation: 10530
Banks have REALLY tightened up on second mortgages and home equity lines of credit. Some friends have $100,000 of equity in their home, 800+ credit scores and the bank would only give them $10,000.

I would look to a mortgage broker and possibly look to see if you can refinance with some kind of a construction loan.
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Old 11-08-2009, 07:35 AM
 
Location: Wake Forest, NC
835 posts, read 3,622,339 times
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Find a Loan officer with a local mortgage broker that specializes in FHA rehab loans.
I have not done 1 but if I understand them correctly the loan to value is determined by the after construction value not the value today. They will not give you the money up front but maintain it in an account to pay for the construction as it is completed to insure that the property they are lending on(your home) is increasing in value with each draw and balance increase.
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Old 11-08-2009, 08:53 AM
 
4,010 posts, read 8,942,772 times
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Quote:
Originally Posted by Jadeviolet View Post
.....
Our credit score is around 700. Our home is worth about $100k and we're looking for about a $40k loan. (we're the tiniest home in the neighborhood by far.) we don't have much equity. We are revisiting this after talking to everyone in town about 6 months ago.

How can we get a loan for a simple home addition? We qualify for a mortgage 100 percent bigger, no problem! But that's not what we want. Ideas? Help!!
Given what you said, I think your best bet is to buckle down and save up some money first. To be honest, what you described here sound a bit irresponsible in regards to taking on more debt in regards to what you have accomplished.
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Old 11-08-2009, 10:33 AM
 
Location: Planet Eaarth
8,955 posts, read 17,696,359 times
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Quote:
Originally Posted by lumbollo View Post
Given what you said, I think your best bet is to buckle down and save up some money first. To be honest, what you described here sound a bit irresponsible in regards to taking on more debt in regards to what you have accomplished.
I agree. While many think they need a bedroom for each child I can tell you that kids do fine with less as long as you love them.
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Old 11-08-2009, 12:30 PM
 
28,441 posts, read 71,029,142 times
Reputation: 18396
I would really want to know some things before I passed ANY judgements.

The OP says they talked to everyone in town 6 month ago. In some parts of country things HAVE improved at SOME lenders. If you have a house that is worth about $100K AND YOU DON'T HAVE MUCH EQUITY then you probably cannot use a HELOC or other home equity type loan to finance an expansion BUT THERE ARE OTHE OPTIONS available to finance an addition/ renovation.

The OP says they COULD afford a mortgage that is double there current payment -- my question then becomes: Does it make sense to SELL and buy a house that is ready to go? That depends on many factors -- current building costs, inventory or available homes, savings / equity for down payment and others.

If the OP talked to everyone I really would want to know WHO and about WHAT. I am willing to bet that talking to a large money center bank about this would yield a VERY different answer than talking to credit union or sub-regional bank. I also would want to talk to real estate agents and some of the remodeling firms that MIGHT have in-house lenders and/or relationships with firms that finance home improvements. There were firms that routinely did this but with super-low HELOC rates some banking types probably have forgotten about this option, which IS not as cost efficient BUT might make sense in you situation...
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Old 11-08-2009, 02:55 PM
 
2 posts, read 38,744 times
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Thank you for the responses! A couple of clarifications. While we may qualify for a $200k mortgage, we certainly wouldn't want one and it probably wouldn't be in our real budget. If we did sell and buy, we'd be looking closer to $150k. The reason we'd rather build is we love this home, it's a great location and we don't want to take our oldest out of his school. Secondly, I am certainly not concerned about each child having their own room! (People always seem to assume this is our issue.) They've shared for 2.5 years already. The issue is our home is only 1100 sqft. It's very small and space is very tight. Putting a child to sleep in one room while trying to get the other to cooperate and be quiet just in the next room has been very trying every single day and night. I was wondering if a broker was going to be our next move. When we've talked to the banks in our area, including our credit union, they look at us like we're crazy. I realize it's because there's no collateral when you're talking about a home addition that doesn't exist yet. I've had a former broker explain to me how they value the construction loan (based on the final value) but no one seems to offer it. Unfortunately the reason we have very little equity in our home is because it has not appreciated in the 4 years we've been here. (But at least it hasn't depreciated really.) It's not because we've been irresponsible with our money. We do have money saved but not the $30-$40k or more we need. But unfortunately a HELOC or home equity isn't a solution for us. Thank you for the ideas, everyone.
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Old 11-08-2009, 07:10 PM
 
28,441 posts, read 71,029,142 times
Reputation: 18396
Stick to the basics of why lenders USED to make home improvement loans -- they can be MONEY MAKERS for the lender with VERY LITTLE RISK. The reason it is low risk is that you will almost certainly be increasing the value of your home AND if lender REMEMBERS how this used to write these loans so that they do hold a lien on your property but they keep this and do not resell it in the secondary market as they might with HELOC.

I know such loans are offered from a WIDE VARIETY of sources, from State & Federal Agencies to utility companies and old fashioned "finance companies":

CalVet Home Loans
First Electric Cooperative | Home Improvement Loans
HUD FHA Title I Lender Approval Application Package
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Old 04-11-2010, 05:49 PM
 
Location: Canada
1 posts, read 18,896 times
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