     jonjon (Johnny) | Saturday, February 17, 2001 - 04:53 pm 
After receiving your advice concerning my chances of getting another mortgage loan after BK / Foreclosure, I decided to take another approach after learning that it would be a minimum 2 year wait with less than 20% downpayment. So, here is the deal I have received and been approved, but I am exploring a couple of alternatives. We found a builder who would build a custom stick-built home on our property and do the financing provided we gave up the property as collateral. This builder had very good rates for someone in my position (8.5 fixed 30 Yr). Since we were given a piece of land with which to build on, we have no closing costs, no PMI, and no downpayment since the land serves as the downpayment. The position I am in is that coming out of BK, I do not want to get myself into a longterm 1000 - 1500 /month house payment. The builder will complete the home to any level of completion you choose and it is up to you to finish the home. What I am not sure about is whether I could get the money to finish the home. If I have the builder complete the home turn key, my cost will be around 141,000. The level of completion I would like to get to would cost me about 88,000. I have priced materials that I would need to complete the home (I had contacts who could get the materials much cheaper than I could), and it would cost me approximately 20 - 25K to finish the home. Although I am not a liscensed contractor, I do very good work and have many years experience at this. I would even be able to continue renting while I completed the home (Financially that is). I have had the home appraised based upon the appraiser looking at the property and a detailed materials list, and it came in at 145,300. What I don't know is this, would I be able to get a home improvement loan or perhaps a second mortgage to finish this home. As I had said a few months ago, the BK is just now 6 month old, scores are still very low 500's although I may be able to get them up a bit after correcting a few inaccuracies, and as far as I know, the Forclosure is not complete or if it is, I have not been notified (keep in mind that the home was included in the BK and it states so on the CR report). Any advice????? |
| jonjon (Johnny) | Saturday, February 17, 2001 - 05:20 pm
Christine, I'm sorry for not hitting the Enter key a little more often (actually any at all). I remembered after I posted this message. I will do better in the future. |
| Christine Baker (Admin) | Monday, February 19, 2001 - 06:38 pm
No problem, Johnny. Remember that you can edit your messages within 30 minutes from posting.
I see a number of problems with your plans, aside from your bankruptcy.
Home improvement loans are to "improve" a home. I doubt that finishing a property that you can't live in will qualify.
So you're looking at getting a construction loan. Banks generally don't like to finance "owner" builders. They've seen their share of disasters. AND they'd be in 2nd position, another negative.
Also don't know about the appraisal. Usually the COST approach is much less important than the COMPARABLE sales.
If your numbers are accurate, I'd like to see you finish the place. Have you talked to the builder about financing the finishing materials?
I don't know the value of the land. Contact some "hard money" lenders in your area. They should be able to give you an idea of THEIR estimated value, which is probably much less than your appraisal.
Even if you pay 20% on the $25K, it would be worth your while provided it doesn't take you too long to finish. Once you got your certificate of completion and moved in, you could look at refinancing. Of course you never know what lending requirements and rates will be then.
The builder is your best bet. He could make advances on a high interest 2nd loan as you need more materials, and of course he could inspect your work to make sure it's done right. When you're finished he could rewrite the 1st for the total amount.
Of course that's a lot of work for the builder (or anyone else,) but if the money is right he might do it. |
| jonjon (Johnny) | Monday, February 19, 2001 - 09:32 pm
Would there be any hope of say a home equity loan where I know the finished cost would be less than 80% appraised value. Something that would allow the lender to pay out the money as the individual interior projects were completed?
The builder will finance finish materials but his costs are greatly above (50% mark-up or so) what I can buy them for. In other words, he doesn't want to but if he does, you're going to pay big time. |
| Christine Baker (Admin) | Tuesday, February 20, 2001 - 11:51 am
I doubt you can get "institutional" financing.
Home equity loans are mostly for owner occupied homes, there might be some for investment property, but I've never heard of a construction equity loan.
It's a TON of work and extremely risky.
Here is an example of the market:
"Clay" $130K still available of this $180K first to build a $303K new Bay Area home. Owner occupied, 60% LTV, pays 10% for 1 yr. comes with fire insurance, ALTA lenders title ins, draws etc. as usual.
Notice that they're in 1st position and at 60% LTV. |
