Board Topic: construction loan questions
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construction loan questions

Posted by: laurie sore Feb 24 2004, 07:51 PM
My husband and I have just moved to Florida from the U.K., where we lived for the last 14 years. We have no credit rating in this country, however our credit in England should be excellent, as we held a mortgage for over 10 years and had lots of credit card debt with never any late payments. We want to buy a new home which hasn't yet been built. It is on a residential housing development. As we don't have employment yet (we only moved over 4 weeks ago and are now actively seeking employment) our developer thinks it unlikely that we will qualify for a construction loan. The house price is approx $250,000 and we will be putting down a deposit of approx $140,000. He has suggested that they can arrange something called an In Loan (?). I believe this is where they finance the loan for us (?) We would need to put down initially 20-30% to finance the build and that we would make no interest payments on the loan until the house was completed and we moved in. He says we can get a good interest rate and probably have lower payments than with a construction loan. They appear to be reputable, well-established builders. I have never heard of this practice before and can't find any details on the web (it is possible I misheard him, but I was sure he called it an in loan). If anyone can offer advice I would be extremely grateful. We are meeting with the developer tomorrow morning. Thank you very much!

Posted by: loanuniverse Feb 24 2004, 08:23 PM

The bad news is that the builder is probably right. You are probably going to have difficulty getting a regular construction loan since you are both unemployed and there is no credit history on you yet. I am not a residential lender, but let me give you some feedback on your situation as I see it.

You also got a big plus You have $140,000. This means that someone, somewhere will be willing to lend you money. Probably not at the best rate, but with a prospective loan-to-value under 50% you will find takers.

Listen to what the developer has to offer Do not sign anything right away. If they apply sales pressure to close the deal, don’t sign until you understand everything and get everything in writing. I would personally not sign a purchase contract until language is added that makes it clear that the seller will provide financing ”Make sure that the rate and terms are spelled out”. You might end up getting a loan with a double digit interest rate, which would increase the cost of the house a lot. I would even go as far as consulting an attorney to make sure that the financing is binding on the seller.

Be ready to walk away I know is hard, but I walked away from 5 houses when I was buying my own. It is better to feel bad for a couple of days than do a deal that you will regret for all the years that you live in the house.

In loan? I think he meant ”In house loan” as in ”We will finance you in-house”

Get familiar with interest rates and amortization tables Wathever they offer, make sure that you can dissect so that the true cost of funds is figured out.

The builder might be right, but it does not hurt to check with banks in your area.

They appear to be reputable, well-established builders I would do an internet search, even some of the largest Florida builders have had spotty history of construction quality and responsiveness to home buyers.

Hope this helps

Posted by: laurie sore Feb 24 2004, 09:13 PM
Thanks very much for your advice, I really appreciate it!!!


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