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Construction loan questions
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Posted by tn1978 (My Page) on Tue, Jan 12, 10 at 20:37
| I didn't want to hijack the other posters constructon loan question.
We are just about ready to shop around for a construction loan and have a few questions. Are banks still accepting land as only down payment, or are they wanting some cash too? Land is paid off, and was valued at 76k 5 years ago(don't know what it is worth today). I understand that the home equity is calculated based on Final home value - mortgage value. As long as that is greater than 20 percent, we should be good, correct?
What is a fair closing cost % estimate? There aren't many calculators for closing costs on construction loans. This is in PA.
thanks in advance |
Follow-Up Postings:
RE: Construction loan questions
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| I'm in PA also and lenders in my region of the state are still only considering giving mortgages to those who can cough up 20% cash against the cost of the house constuction IN ADDITION TO the value of the land being fully paid for completely. Example: If one owns a free-and-clear-paid-for $40,000 lot and wants to build a 300,000 house, the lenders are STILL requiring 20% of $300,000 or $60,000 cash down PLUS the FULL LOT VALUE ($40,000) as collateral against the mortgage. Doctors, Lawyers, Accountants and other professionals are having a hard time qualifying for mortgages under these terms and few builders are building because their clients can't qualify because of the tight banking regulations. If you are NOT in this exclusive club and can NOT afford more than 20% down and have a free-and-clear lot....then you don't stand any chance right now of getting a mortgage in Pennsylvania under most circumstances.... Sorry. |
RE: Construction loan questions
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| It's definitely *weird* out there! Building in DE (with funds from a major east coast lender that unfortunately does not seem to serve PA - just checked their web page) we've been assured that our lot value *does* count toward the 25% (note, not 20%) down that they want from us. |
RE: Construction loan questions
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| Don't just shop banks. Talk to credit unions, also farm credit agencies, if you are in a rural or semi-rural area. You don't have to be a farmer to use a farm credit agency. We went through a credit union. We didn't even consider banks or mortgage brokers. |
RE: Construction loan questions
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| We closed in Aug. One time close with construction converting to permanent 30 yr fixed. We paid off the rest of our land with the first draw. Ended up doing an 80% first and 10% 2nd mortgage. It's important to get approved as high as you can up front which we did. Origination portion was $500 for the construction loan and $500 for the permanent. None of this 1% origination stuff others wanted. Can't remember all our closing costs right now but they were very reasonable. We extended our construction loan twice and and our lender was real cool to work with. Local bank and great title company. |
RE: Construction loan questions
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| Follow up for anyone looking for a construction loan. We were able to get a construction loan with no cash down payment other than lot equity. Closing costs are around 5k. Less than 2 weeks to get approved. There is money out there if you look. This was a local bank. We decided not to lock in now, since they wanted a refundable 1 1/2 points at closing to "hold" the 30 year perm mortgage. The lock in rate was not that great, so we will wait out the market. |
RE: Construction loan questions
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| We talked to several lenders and all would allow the use of the lot (paid for) to be credited towards the required downpayment. For us that was 20 percent, but I understand that depends heavily on how much money you are borrowing and whether your loan is conforming or jumbo or "super jumbo" . . . We are in Georgia. |
RE: Construction loan questions
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| We were able to get a construction loan with no cash down payment other than lot equity. Closing costs are around 5k. Less than 2 weeks to get approved. There is money out there if you look. This was a local bank. We decided not to lock in now, since they wanted a refundable 1 1/2 points at closing to "hold" the 30 year perm mortgage. The lock in rate was not that great, so we will wait out the market. Try a credit union. We got a lock in at 0.5% with a very good rate. |
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