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We are expecting another baby this summer, and we will need to finish our third floor. Home equity line of credit isn't an option for financing because we've lived in the house for under 4 years. The value of our home is about equal to what we owe on it, thanks to the housing slump. Does anyone have any experience with obtaining a private loan for a home addition/construction? I'm sure there won't be many lenders to choose from. I'm interested in hearing if anyone has worked with a local lender.
Some banks have construction to perm loans where you don't need any equity to pay for the improvements/additions. You'll need to get an estimate from a builder you trust to do the work and then the loan will be based on what the house appraises for in as-completed condition. Of course, you have to stay under 80% loan to value.
The caveat with these type of loans is the banks want to see something substantial that adds real value to a home. Adding heated square feet is a big plus.
My wife and I just went through this process and closed on the loan last week, should break ground in a couple weeks. We are adding 1,200 sf in addition to many improvements. If you need a reference for a local loan officer, send me a PM.
Try a credit union. I know SECU has loans like this that might work if you are a member there.
The credit union wasn't very competitive in this area as far as rates go. The only thing they offer that a lot of other banks don't is up to 90% financing. Their rate for this was over 6% recently though. I locked in at 3.5% for my mortgage with a different bank.
I'm confused...who were you trying to get a home equity loan from? Your current lender?
I owned my last home for exactly 4 years. My mortgage was at wells fargo, yet my local bank was constantly bugging me to take out a home equity line. Many other banks advertise the same. they didn't care how long I owned the home.
When I moved here, I had to close on my Raleigh home before my NY home closed. I was able to do that by opening up a Home equity line at a bank where I had no previous relationship (first citizens). Even though I paid it off in full when the NY home closed, that Home equity line is always available for me to tap.
That said, i would be very very wary of expecting to get a return for your investment of more than 75% on that addition...especially since your home is already devaluing.
We haven't visited any lenders yet. Just doing research online with local banks. There is no equity in the home currently for us to tap into. Our home has not appreciated. We bought the house in Aug of 2008, right before the market tanked. We owe *maybe* what it's currently worth. There aren't any comps in the neighborhood, so it's really hard to guess at the value. I don't exactly trust Zillow's estimate. I am assuming that we will have to do a personal loan vs a line of credit.
When I first contacted the bank about my home expansion/improvement project, just based on neighborhood comps we were nowhere near where the value needed to be. It was recommended to hire an appraiser to know for sure. So, we had to pay $400 just to figure out if we were going to be in the ballpark for a construction to perm loan. Ended up being $25k higher in value than we needed. The bank-ordered appraisal was a little less, but still where we needed it to be, so it worked out.
You might end up having to do something like this if there are no good comps close by. Both of the appraisals done on our place (in as-completed condition.) had comps farther out, but the appraisers felt comfortable with them and the bank-ordered one passed through underwriting with no trouble at all.
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