Cash out from land equity

[Anonymous]

What do you think are my chances?

I just applied for a $35K cash out "refi" land loan for a 1.75 acre parcel of buildable land with no liens that I own free and clear (no loans or owed $ on it what-so-ever).  It's tax assessed value is $74K and I'm estimating, based on comps, that it'll appraise around $65K so the estimated LTV is around 54%.  The bank I've applied with has a maximum LTV of 70%.  My FICO's (pulled last week) are EQ 661, TU 681 and EX 698 but that was before a couple of hard inquiries while shopping rates, so they'll probably see a few points less than that.  My last 30 day late reported was in March 2009.  I have two collections accounts reported that have been paid in full since 2008.  I also have a civil judgment showing up from 2006 that has also been satisfied and paid in full in 2008.  I'll be using all of the funds to consolidate debt and will have the bank submit the payoffs so that they know that those debts have been paid in full.  My DTI is currently 23.1% before the loan.  I've offered the LO an LOE on the derogs but haven't heard back yet (been communicating thru email).

Think this loan will be based upon how good a Valentine's Day the underwritter is having? 

[Anonymous]

What was the FICO minimum for the loan program you are looking at.  My only large concern would be the drop in FICO scores that you may be seeing.  680 is the minimum for alot of lenders (especially cash out) and 640-660 is pretty common across the boards.  So if they want to see a 680 score for a cash out refi then it gets questionable.  That said, My guess is at that LTV and with the DTI looking low (once they pay off the cards) it shoudl be fine.

[Anonymous]

I wasn't told nor did I ask what the guideline score was. She told me it would be a portfolio loan which I assume means that it would be carried in house. Not sure if that means more strict requirements or not. The DTI and LTV are in great shape and may be enough to outweigh the score. My midscore last week pulled by a mortgage broker was a 681 but now with the two hard pulls I'm wondering what she got for a score. I guess its a waiting game now.

[ShanetheMortgageMan]

What did the loan officer think your chances are?  They know their own banks underwriting tendencies (since it's portfolio'd), so they should have a fairly good feel on if you'll be approved or not.

[Anonymous]

My LO seemed positive given the estimated LTV and my DTI level after the loan.  My midscore (681) seemed adequate but with that said there are some baddies reported such as an old paid judgment (from 2006), two old paid collections (from 2006) and the most recent 30D late in March 2009...  She said all the issues are more than 2 years back so the UW may not need to have those addressed (provide an LOE).

Before she pulled my scores/report I told her what my scores were from another lender last week.  Using the midscore I gave her (which was the same as she pulled at 681) she quoted me a 8.75% fixed, 0 points, 15 year loan if my score was 680 or higher.  I told her that with the recent hard inquiry last week my midscore may be lower than a 680 and asked what the terms would be and she said, if approved on the loan with a midscore below 680, add 0.25% to the interest rate, all else remains the same...  So it seems as though, without directly asking, that their "guideline" score is 680.  She said we should hear back within a week.  I gave her an LOE on my older than 24 month derogs as ammunition and she said that it was a thorough explanation and will provide it if asked.

[ShanetheMortgageMan]

From your LO's take it appears your chances will be pretty good.  Keep in mind next Monday is President's Day and a lot of banks are closed, but it sounds like you should hear in the next few business days.

[Anonymous]

DTI is estimated at being 36% with the new loan payment and factoring in the payoffs.  My LO asked for a statement as to how important this land is to me.  I think she asked that of me to ease the concern that I'd cash out with this loan and then try to sell the land sometime in the future.  So I gave her a strong statement about how I'll own this property for life.  I think she now has the information she needs to give answers to any questions UW has without having to ask me and wait for my reply.  I asked her straight up if she thought the loan was approvable and she said that consolidation loans are considered high risk, but that I've clearly been working hard on rebuilding my credit, the DTI is good and hopefully the LTV will be where it needs to be.  She also said that she's not really sure how approvable the loan is since she's never done a cash out "refi" on land without a house on it and that there are variables she may not be aware of with such a loan type.  She's assuming several conditions must be met but she's curious what they will be.  The appraisal for example will be a condition due to the LTV factor...  I'm hoping I hear back today.

[Anonymous]

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@Anonymous wrote:

 My LO asked for a statement as to how important this land is to me.  I think she asked that of me to ease the concern that I'd cash out with this loan and then try to sell the land sometime in the future. 

Why would selling the land at a later date and paying off the loan early ,be a bad thing for them? I tend to believe she asked you that because  you could take the money and then let the bank have the land back in forclosure. Not suggesting you would in any way. It's just that  this whole housing and land fiasco  over the last couple of years, left alot of banks with uncompleted  houses and building lots  from builders and contractors  that the banks are having to complete and or sell . Talking to some LO's with some local banks  in the area. Their stories  talk  about local builder's walking in and literally throwing the keys  to 3 or 4 and even 6  uncompleted houses on there desk and leaving (future building lots as well). It did get a little more involved  than that  (but this is the short version)  Not to mention alot of the same banks having to still sell exsisting  forclosed homes.  This is some of what there talking about when they say banks are still  nervous about real estate loans.

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[Anonymous]

@Anonymous wrote:

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Why would selling the land at a later date and paying off the loan early ,be a bad thing for them?

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Key phrase right there.  "and paying off the loan early"  I was under the impression that she was asking because I could sell the land and keep the profits and not pay off the loan...  In either case, it won't happen so no big deal there.  Still waiting to hear back.  This waiting game is nerve racking! 

[Anonymous]

My LO informed me today that my file will be in front of the Loan Committee tomorrow afternoon. Is that standard proceedure instead of just a single underwriter looking at it? I fear my chances of approval under a committee will be slim as compared to just one underwriter...