Construction loan after a foreclosure?

[Anonymous]

Hi everyone,

Hopefuly this is okay to ask in this forum, but we are desperate for any leads on any bank willing to even consider us for a construction loan in Washington State.  Our credit score numbers are in the mid-700's, so that doesn't seem to be the problem, it's just this ridiculous 7-year-wait rule after foreclosure that's stopping us.

We bought some land (paying through Owner Financing) about 2 years ago.  I guess I didn't realize that a construction loan is considered so much more "risky" to banks than a conventional mortgage is.

We are just under 4 years since our last home sold at auction, and are looking for a construction loan.  So far, pretty much everyone has told us that we are out of luck until 7 years pass from the date of the foreclosure.  We had one bank who looked at us, but ultimately decided that we would need to wait the 7 years, after we applied.

I realize that some lenders are offering an FHA construction loan, and that the wait time is only 3 years, but the cap is a measly $271K, which in WA state, is simply way too low to realistically build a house.  Our costs will probably be closer to $350K.

We are now considering a hard-money lender, but even that may not work, since it seems that they typically only are willing to loan at 65% LTV, and I think we will need at least 80% LTV to afford this project.

Can anyone offer any help? Does anyone know of a conventional lender in Washington who will even consider us before 7 years? Or does anyone know of a hard-money lender willing to loan 80% or 90% LTV?  

Or are we just stuck renting for 3 more years?

Thanks very much for any help.  Please...

[Anonymous]

What county are you in?  My brother lives in Washington.  He was telling me that if he were to go just a few miles from where he lived, his FHA limit went from $271k to like $360+k  It actually varies by area (low cost vs higher cost).  You may want to double check that first.

[Anonymous]

Thanks a lot for the reply, but I gues I don't understand.  I'm not sure what "going a few miles" means.  If you are refferring to where to buy land, we already have the land, so finding a different place isn't an option right now.

Thanks anyway, though.

[Anonymous]

What I meant is that the FHA maximum varies by location.  The maximum isn't state wide.  Example, in one county, the maximum was $271k but in another county it was $362k.  Seattle is even higher at $475k+  I was just suggesting you double check the county you are in to see what the max FHA loan is.  It oculd be higher than $271k.  Fannie Mae loans have even higher limits than FHA.

[Anonymous]

Thanks again.  I have already looked into the FHA thing multiple times, and my county is stuck at $271K as the loan limit.  From what I understand, there is no way around that cap.  So, unless something changes, FHA loans are not going to work for us. Thanks.

[Anonymous]

You do NOT want to use a HML for this. HML is for real estate investing for a quick turn around time on investment between 6 months to 3 years to pay it off in full. It's what investors & developers use for investing. Going this route you will be sure to run into problems with losing the house unless you plan on paying off the house in 3 years tops which is almost $4,000/month & that DOES NOT EVEN INCLUDE the sky high interest. Hard money lenders make money by giving out quick HARD money. 

[Anonymous]

Thanks for the reply, WiscoBrokeGirl.

I guess I don't understand - why would we have to pay off the hard money loan in 3 years?  What's stopping us from refinancing to a conventional as soon as our ridiculous post-foreclosure waiting peroid ends?

Anyhow, the hard money lender flaked-out, so it's not an option.  You are probably right that it was best not to do that.

AFAIK right now, we are just stuck waiting about 2 and 1/2 more years until the stupid seven-year-wait expires.  Our income and credit scores are fine, it's just that Fannie Mae will not carry a loan after a foreclosure for seven years.  We had "semi" extenuating circumstances - tranferred jobs and were unable to sell the house (no offers at all) for over a year - but Fannie Mae's idea of extenuating circumstances requires a complete job lay-off or a death in the family.  So we're out of luck.

Don't know what else to do at this point...

Thanks.

[dt3813]

I don't know much about any of this mortgage stuff, but I have a foreclosure (9/2009), deed in lieu (9/2009) and a ch. 13 (2/2010).  I was told with 30 percent down, I could get a loan with a portfolio mortgage lender (or FHA...but like you FHA limits are too low).  Have you researched portfolio lenders near you?