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     | Tuesday, April 03, 2001 - 03:40 pm  Hi, We are applying for an FHA construction Loan. I have several questions. We filed a BK 13 in 3/99 completed in 12/99. Two CC items on our CR is showing up as Discharged in BK/Charged Off. The other one says Discharged in BK/Closed Account. SOL is up on all of them. They were included in the BK. The lender said something of having to pay these. (1)Will they have to be paid in order to get the loan? (2)Could this hinder the FHA loan? No bad credit since 3/99. Have only established 1 CC, but have established many other accounts that are not reported to CRA's. (3)Anything we should know that would help secure this loan? My three FICO scores are in the 560's. My wife has a 751 with equafax ( which after many months of hard work was the only CRA to get it right) her other scores are in the 560's. (4)Is there any way to rectify the other two CRA's? I have been reading about ways to get help with the downpayment. (5)Is any one company better then another? Anyone with experiance with these company's please let me know how it went. Sorry so long. Thanks for the help. Mike
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| | Tuesday, April 03, 2001 - 05:19 pm Mike, are you sure you filed Ch. 13, not 7? Discharge is Ch. 7. Also, what about those 2 credit cards, were they included?
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| | Tuesday, April 03, 2001 - 06:09 pm Mike, FHA does not do construction to perm loans as far as I know. They only do end loans, meaning the builders builds the house and then you buy it. Score do not matter, if the CC were not discharged in the BK you most probably will have to pay them. Check you BK filings. If they were in the BK then give the lender the filings and they should be able to figure it out. Since you dont have a lot of new credit, you can use alternate sources. Find my postings on this site about FHA, I've pretty much posted they whole guidelines for credit. Maybe Christine could direct you to the right place. Everything you need to know is posted there. It's quite lengthy so be prepared to read. Let me know if you have otehr questions.
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| | Tuesday, April 03, 2001 - 06:15 pm Yes, it was a ch 13. All three CC were included in it. It was 98% a buisness Bk with only a few personnel items included. Ie... the three CC. We managed to dispense with everything in a short amount of time. I can understand them listing them as Discharged in BK, but the extra comments do not make sense. Is there a difference in the type of ending to the different BK's? If you have any answers to the other questions would really appreciate. Thanks Mike
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| | Tuesday, April 03, 2001 - 06:28 pm Don, Check out http://www.amo-mortgage.com/library/fhaprograms/perm.html This is the process we would be doing. It explains it. Mike
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| | Tuesday, April 03, 2001 - 06:28 pm As long as it says included in BK you should be ok. See other post in the RE section about FHA qualifying. If you need any help, feel free to email me at don@aimloans.com
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| | Tuesday, April 03, 2001 - 06:39 pm Now I know why I didn't recognize this. He is the info from the actual Hud guidelines. It is/was a pilot program. Looks like it is avail. nationwide. However, this structure seesm odd as most builders who are FHA approved are large track builders. Don;t know of any small builders doing this. ML 92-25: Single-Family Loan Production -- Construction/Permanent Mortgages Pilot Program (08/11/92) TO: ALL APPROVED MORTGAGEES On May 18, 1992, Secretary Kemp announced a number of new initiatives to strengthen the home-building industry. One of these initiatives is a pilot program to provide single-family mortgage insurance for construction/permanent mortgages. The Department has elected to offer this pilot program in five states -- California, Colorado, Florida, Maryland, and Texas. This Mortgagee Letter is to provide guidance to Field Offices and lenders in these states on the processing, underwriting, and insuring of construction/permanent mortgages. A construction/permanent mortgage provides for funds during the construction period and then converts to a permanent loan upon its completion. Since there is only one closing, prior to the start of construction, it is considered a purchase transaction. The purpose of permitting lenders to utilize these mortgages and provide mortgage insurance once the construction is satisfactorily completed is to assist builders in obtaining construction financing, and to save considerable closing costs since there is only one closing. The construction/permanent loan is made directly to an approved borrower/homebuyer. During construction, the loan is not eligible for HUD mortgage insurance; mortgage insurance becomes available after either a final inspection or issuance of a certificate of occupancy, whichever is later. The Department believes this additional source of construction financing can be extremely helpful to the building industry as well as to prospective buyers of new homes. [Page : 2] Currently, HUD requires that amortization begin not later than the first day of the month following 60 days from the date the lender executes the Lender's Certificate, form HUD-92900-A, page 4. However, regulations are being revised to say that payments must commence by the first of the month 60 days after closing, or after conversion of a construction loan to permanent loan. The loan must be closed using standard HUD documentation with the addition of a Construction Rider to the Note and a Construction Loan Agreement. The mortgage insurance premium, however, must still be received by HUD within 15 days of loan closing. Processing instructions are attached to this memorandum, and apply only to construction/permanent loans with one closing with the same lender. (For individuals acting as their own general contractor, please refer to Handbook 4155.1 REV-4.) Should you have any additional questions regarding this memorandum, please contact the Single-Family Mortgage Credit Branch in Headquarters at (202) 708-2700. Very sincerely yours, Arthur J. Hill Assistant Secretary for Housing - Federal Housing Commissioner Attachment [Page : 1] ML 92-25, Attachment: Processing Instructions, Construction/Permanent Mortgages (08/11/92) General: A Construction/Permanent mortgage combines the features of a construction loan, a short-term interim loan for financing the cost of construction, and the traditional long-term permanent residential mortgage. For HUD mortgage insurance and loan-to-value purposes, it is considered a purchase transaction. The mortgage lender makes the loan directly to an approved borrower/homebuyer. There is one closing which occurs prior to the start of construction. At closing funds are disbursed to cover land cost. The balance of mortgage proceeds are placed in an escrow account to be disbursed as construction progresses. The loan is insured by HUD after construction is complete. Program Information: * Disbursement of Funds: It is the responsibility of the lender to obtain written approval from the borrower before each draw payment is provided to the builder. * Construction Period Fees: Construction loan interest, commitment fees, inspection fees, title update fees, real estate taxes, hazard insurance and other financing charges incurred during the construction period are the responsibility of the builder. * Interest Rate: The permanent mortgage loan interest rate must be established at closing. * Closing Costs: Only the typical, customary, and reasonable closing costs may be included in the estimate of closing costs upon which the maximum mortgage amount is based. No additional fees or charges may be included for this type of financing. * Disclosure: The borrower must be provided with a disclosure explaining that the loan is not eligible for HUD mortgage insurance until after either a final inspection or issuance of a certificate of occupancy by the local governmental jurisdiction (whichever is later), and that the Department has no obligation until the mortgage is endorsed for insurance. This Disclosure statement should be prepared by the lender and approved by the local HUD office before the beginning of a program of this kind. * Amortization: Must begin no later than the first of the month following 60 days from the date of either the final inspection or issuance of certificate of occupancy, whichever is later. [Page : 2] * Endorsement: Request for endorsement must be submitted by the lender after final inspection or issuance of certificate of occupancy (but within 60 days of the date the later of these events occur). During construction, the loan is not HUD insured. * Remitting UFMIP: Must be received by HUD within 15 days of closing. * Escrow for taxes and insurance: May be established at the time of loan closing or at the time of final inspection or issuance of certificate of occupancy (lender's option). * Builders: Only HUD-approved builders may use this program. An individual builder is limited to 25 units per year under this program. If a builder wishes to increase production beyond 25 units, the HUD Field Office must obtain approval from HUD Headquarters. * CHUMS Information: Lenders mark the front of case binder const/perm and Field Office use Program ID Code 50. (Program identification codes are described on page 3 of form HUD-428, Home Mortgage ADP Code Chart.) Mortgage Amount Calculation: The mortgage amount is determined as for any other loan by applying loan-to-value limits to the lesser of the appraised value or acquisition cost. The appraisal procedure is the same as for any proposed construction case. The appropriate loan-to-value limits are applied to the lesser of: 1) The appraised value, or 2) The documented acquisition cost of the property, which includes: (a) The contractor's price to build, and (b) Cost of the land. (If the land has been owned more than six months, or was received as an acceptable gift, the value of the land may be used instead of its cost.) To both 1 and 2 above may be added 57 percent of any borrower-paid closing costs. [Page : 3] Equity in the land (value or cost, as appropriate, minus any amount owed) may be used for the borrower's cash investment. However, if the advancement of the permanent loan results in the borrower receiving cash out (in excess of $250), the maximum LTV on the permanent loan is 85 percent. If the contractor of the improvements is also the seller of the land, the total acquisition cost for maximum mortgage purposes is the purchase price to the borrower. HUD requires a copy of the contract to determine that there is a legitimate contractor involved and that it is an arm's-length transaction (no identity-of-interest between contractor and purchaser). Other Underwriting Considerations: The following criteria must be met in order for a loan to be considered as a construction/permanent loan and be eligible for HUD mortgage insurance: * The borrower must own or be purchasing the lot (or, if owned by the contractor, must be included in the total contract price). * The borrower must have secured or will secure the loan in his or her own name. * The borrower has contracted with a HUD-approved builder to construct the improvements. (This program is not available to borrower acting as his own general contractor.) * If the borrower is a HUD-approved builder by profession and plans to build his own home, the acquisition cost must be determined by actual documented costs to construct the improvements. Documentation Requirements: The loan is closed using standard HUD documentation with the addition of a Construction Rider to the Note and a Construction Loan Agreement. These construction documents may be in any form acceptable to the lender, but must provide that all special construction terms terminate when the construction loan converts to a permanent loan (at the time of final inspection or issuance of a certificate of occupancy). After conversion, only the permanent loan terms (using standard HUD documentation) continue to be effective, thus making the permanent loan eligible for HUD mortgage insurance. Preparation of a legally sufficient Construction Rider to the Note and a Construction Loan Agreement will be the responsibility of the lender. HUD will not approve or review these documents. [Page : 4] Verification of the Construction Loan: * The balance on the loan when it is fully drawn must be verified. The construction escrow account, if one was established, must be fully extinguished; any remaining funds must be applied to the outstanding balance on the permanent loan. Data on the Lot: * If the borrower purchased the lot within the past 6 months, he/she must provide a copy of the HUD-1 or other settlement statement showing acquisition cost. * If the borrower owns the lot free and clear prior to start of construction, he must provide a copy of the Warranty Deed showing no vendor's lien, a copy of the release of lien, or a copy of the HUD-1 or other settlement statement showing ownership. * If the initial draw on the loan was for the purpose of paying off the lot, a statement verifying the amount must be provided. Other Requirements: * The borrower must provide a copy of the fully executed sales agreement which includes the contractor's price to build. (Mechanic's and Materialman's lien is not sufficient.) If the borrower is including extras over and above the contract specification and/or paying out-of-pocket cost over and above the interim loan, the borrower must provide: -- a breakdown of the extras and the cost of each; and -- canceled checks and paid receipts for all out-of-pocket construction costs. * Prior to submission for endorsement, the DE underwriter must be provided with the following: -- a certification, signed by the borrower after conversion to the permanent loan, that the mortgaged property is free and clear of all liens other than such mortgage (using language from the Borrower's Certificate, item (a), form HUD-92900-A, page 4). -- verification that the construction loan has been fully drawn down. -- copies of canceled checks and paid receipts for all of the borrower's out-of-pocket construction costs. [Page : 1]
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| | Tuesday, April 03, 2001 - 07:39 pm Mike, I have NO idea why your lender would want you to PAY these cards. It's absolutely unbelievable. I would hope that their brains kick into gear when you provide them with the bk paperwork. Personally, I wouldn't do business with anyone that incompetent. Obviously you should work on getting your credit files corrected and on re-establishing credit. If you have any specific credit questions, please post in the Credit Q & A section.
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| | Tuesday, April 03, 2001 - 07:44 pm Thanks Don for the full outline. Also from what I have found out. The contractor agrees to pay all closing costs, interest & Insurance while under construction. Now what about these companies that help with down paymets. Legit? Is one better then another. Do you feel we would qualify by what's on our CR's? Bk 13 , the three CC as they read above. One new card, probably not even on Cr it's so new. Since 3/99 I have 6 accounts not reporting, but all have written nice credit letters. The one other thing on my report that I have the paper work to disprove. Is that when the Bk was over in Dec.the trustee didn't make the final draw for the house payment until mid-feb. SO our wonderful mortagae co reported it as late. Are Fha loans sold? We had a terrible experiance with the last company that bought our loan after we signed. Thanks for all the info. Mike
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