Board Topic: one time closing loan
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one time closing loan

Posted by: richard h Nov 10 2003, 12:17 PM
info:

Starting own design build business, residential custom homes, girlfriend has tear down house and lot appraised at 260,000, owes 77,000, I will design and build new house for 336,000 total construction cost, girlfriend approved for 430,000 long term 30 yr note, she has low 700's credit score, income 125k yr., 8 yr old business bankrupcy, house is primary residence, want to do a one time closing with me as the builder not on the girlfriends mort, want to do an arm program since will sell house within 1 year if sells, with a construction loan to my new company at prime plus one for 9 months, banker said deal has a 77% LOAN TO VALUE RATIO. question, Questions: overall plan is it sound? What is a good rate, is the arm the way to go? broker wants 16,000 in fees, high? should girlfriend go directly to big bank for 30 yr.? any other advice? thanks rich

Posted by: loanuniverse Nov 10 2003, 06:13 PM
Richard:

I am not a residential lender, but looking at this from the point of view of a consumer, I would hate to have to pay $16,000 in fees to a broker. What exactly is included on those fees? Is that the total of fees and points for the lender or just the broker?

When you are paying {I calculated about 4%} in fees to begin with and you are only thinking of holding to the property for a year at the most, your true cost skyrockets. While you are asking me about the rate, you should also consider the origination fees as part of your overall cost of financing.

With the limited information, my first choice would be to go with the bank offering the 30-year mortgage, which I am assuming, will have a construction portion and then convert. The only problem that I see is how comfortable the bank would be with you as the general contractor given the relationship with the borrower, not sure if that will be a problem. Then again, this is not my area.

When you said “construction loan to my new company”, does that mean that you can have an unsecured loan at prime + 1% or does it involve your girlfriend’s property in any way? If it is unsecured then it is great, if it isn’t then it is another story.

Nothing more occurs to me right now, my advice: have your girlfriend consult some banks about a construction/conventional mortgage.

Hope this helps.
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