Do I have a shot to qualify for a Construction to Perm Mortgage Loan?

[Anonymous]

• Credit.  What are your credit scores and if you have any, what negatives (collections, charge-offs, late payments, BK's, judgments, tax liens, back owed child support, etc.) are on are credit and if they are owing or not.  When were the negatives, this is important, month/year is preferred, such as 3/07.  For BK's the Ch, filing & discharge date.  Even if credit isn't less than perfect, if you only have credit for a short period of time (<24 months), authorized user accounts (which aren't considered by underwriting), accounts from your father with the same exact name because you are a Jr., etc. that is important information to know too.

• Ex - 633, TU - 693, Ex - 683
• Charge off 1 - TXU Electric for $827 DOFD = Oct 2012
• Charge off 2 - Lowes for $733 DOFD = Aug 2008
• Charge off 3 - Chase Bank for $5,599 DOFD July 2008
• 6 - 30 Day Late Pay on Mortgage in 24 months

• Income.  Gross income is what is important when qualifying, not net income.  For self-employed/1099'd people it's your gross income minus expenses/write-offs, adding back in depreciation/depletion.  I know this is pretty sensitive for some people to list their income, but remember this board is anonymous (for those of you who want to remain that way).  If you don't want to list your income, and just want to receive advice without addressing that part of qualifying (which is very major), just say you have enough income, no one will pass judgment, but realize the advice given might not be able to be complete.

• W2 for 2014 is $194K

• Source of income.  Where is the income coming from?  Employment, pension, social security, disability, foster care, VA benefits, rental income, lottery income, etc.  If it's from employment, is it salary, hourly, overtime, bonus, commission, etc.
• On job for 6 years and in industry for 15
• Salary = $129K plus bonuses

• Monthly debt payments.  This goes hand in hand with income and the new mortgage payment to determine your debt to income (DTI) ratio.  Only items on credit is the general rule, but also items such as alimony, child support, union dues and some other work related expenses are included too.  Only the minimum required payment amount is what underwriters are concerned with.  Items such as utilities, cell phone, insurance, etc. are not included in the DTI.  If you have a question if something is included just ask.
• $4,523.55
• Employment (for those who are employed).  What type of employment such as self-employed, S-corp, W-2'd, 1099'd, part-time, full time, 2nd job, etc.  How long have you been on the job & how long have you been in the industry.  A 2 year employment history is what most loan programs require.  For those who have been self-employed less than 2 years, what did you do before your venture?  For those of you who have less than 2 years employment history, did you graduate from a higher education school before you started working?

• On job for 6 years and in industry for 15

• Assets/Reserves.  This is to determine how much you could potentially have as a down payment and also as reserves to help qualify (for example if your debt to income ratio is high this could help qualify you anyway).  Savings, checking, 401k, IRA, stocks, bonds, CD's, mutual funds, money market accounts, gift, etc. all can qualify.  If it is a pension or retirement account that does not permit you to withdraw or take a loan against (other than for hardship), and is only able to be used after you quit or retire, then it cannot be used as reserves.
• ~$20K in bank
• Equity in Land = $35K

• Location.  What state & county.  City or zip if you want but usually that is not needed.  This is to determine FHA loan limits, what special programs might be available for you, how much property taxes & homeowners insurance will likely be, amongst other items.
• Zip 75169

• Property.  Is it a single family house, condo, townhome, 2-4 units, 5+ units, manufactured home, a co-op, condotel, the penthouse of a 45 story apartment building, suburban, rural, a lot of acres, a working farm, a gas station, etc.  Also the condition of the property is helpful, as lenders have certain minimum requirements properties must meet (working utilities, etc.).
• Single family home rural with 10 acres
• Water and electric on site
• Value.  For a purchase transaction, what is the home price range you are looking in, narrowed it down to, or are under contract for... and for a refinance transaction what is the appraised value of the home and when did you purchase your home.
• Construction costs ~$300K
• Land payoff ~$15K
• Occupancy.  Primary residence, vacation/2nd home, non-owner/rental property.
• Primary
• Transaction Type.  Is it a purchase, refinance just for better terms, refinance to take cash out, looking for a 2nd mortgage, a reverse mortgage, etc.
• Construction to permanent

Thanks for looking...

[bigman023]

There is not much info available on this site about these kind of loans.  Ive been looking into them myself, as I would like to build a 2nd home.

From what I can tell, Construction loans are converted to  conventional mortgages.  So just find as much information on conventional mortgage requirments and you should be fine.  Owning your own land also seems to help as well.  

If you end up going through the process, please update this thread!

Good Luck

[Anonymous]

Thanks. Will keep plugging away.

[StartingOver10]

Actually construction perm loans are different from end loans. Most of what we discuss here are 'end loans' - which means the lender is financing a property that is c/o'ed (has its Certificate of Occupancy).

Construction perm loans are construction loans with draws that convert (usually automatically at the end) to a permanent loan. The credit criteria is generally higher. Most of the lenders want a qualified licensed and insured builder for the construction and not a owner builder type (those are extremely difficult). You are better off going through a local or regional lender for a construction perm type loan. You do have to pay interest on the amount drawn during the construction period. I will say it is much easier today to get a construction perm loan than it was even a few years ago - you have many more options.

You will need to provide the lender with plans and specifications, builder will have to be approved by the lender too. Each draw has the appraiser come and inspect to make sure the builder has completed what the draw schedule calls for before the lender will disburse. The builder will have to supply lien releases for all subs involved in that particular draw. The lender will have a very specific loan package for you with all the information you need.

I would stay away from the big box banks though. They are conservative and slow.

[Anonymous]

I guess I'm asking about my credit and DTI profile.  I'm pretty comfortable with understanding a short term construction loan and the transition to a conventional mortgage.  Based upon the details above, would I have a shot to qualify?

[StartingOver10]

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@Anonymous wrote:

I guess I'm asking about my credit and DTI profile.  I'm pretty comfortable with understanding a short term construction loan and the transition to a conventional mortgage.  Based upon the details above, would I have a shot to qualify?

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You said 6 mortgage lates in the last 24 months. When was the most recent late (date)?

You have $4500+ in current debt. Does that include the new house payment or is that additional debt on top of the new housing payment?  (not clear from your post).

[Anonymous]

7 months ago. Includes a $2000 month new house payment.

[frugalQ]

mortgage lates as recent as 7 months ago will more than likely be a big hurdle to get over.  you may have to wait for those lates to be over 12 months.

[Anonymous]

Yeah, that was just my outright defiance.  It's really my land payment but it says mortgage on the credit report.  American National Bank of Texas will not allow you to electronically pay your mortgage if you don't have an account with them.  I would drive out always a day late.  That's totally my fault but I corrected it by opening an account with them, setting up direct deposit from my paycheck to pay the payment and then setup a recurring payment from that account.

Horrible I know and only hurt myself.  I always had the money avaiable.  Just lazy.  Dangit.

[cem13]

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@Anonymous wrote:

Yeah, that was just my outright defiance.  It's really my land payment but it says mortgage on the credit report.  American National Bank of Texas will not allow you to electronically pay your mortgage if you don't have an account with them.  I would drive out always a day late.  That's totally my fault but I corrected it by opening an account with them, setting up direct deposit from my paycheck to pay the payment and then setup a recurring payment from that account.

Horrible I know and only hurt myself.  I always had the money avaiable.  Just lazy.  Dangit.

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Are you sure the CRA are showing you as "LATE"?  If you are only a few days late, you will not get a baddie.   You have to be 30 days late when the next statement cuts to be 30 days late.  For example, if your note is due on the 1st, and they give you a 5 day grace, you have until the 31st to pay as the statement cuts on the 1st.  You will have to pay late fees after the 5 days but that is all.