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Posts: 17
Registered: ‎01-04-2008
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New construction home loan???

I am currently researching all the different places to get a new construction home loan.  I have been putting it off because I knew it would be long and difficult.

My husband and I purchased the land to build a house on about 6 months ago with money we had saved.  Now we need to get a loan to start the construction.  My husband will be the one building the house...that is what he does for a living.

I am kind of concerned about getting a good loan.  I have a full time, good job with an ok salary.  My credit scores are 749, 763 and 730.  My husband is self employeed and his credit scores are 661, 632 and 666.  After running our reports I am taking steps to improve both our scores, but that won't happen before we apply for a loan.
My biggest questions are (1) what are our chances of getting a good loan with our credit scores and what type of interest should I expect; and (2) what are good places to get new construction home loans.
We currently bank at CitiBank.  CitiMortgage does offer new construction home loans, however, I am sure there are more places out there.
Thanks in advance for any advice or encouraging words!
Frequent Contributor
Posts: 430
Registered: ‎10-28-2007
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Re: New construction home loan???

We are in the same boat...On. Jan. 1st a lot of rules changed (so we were told) for const. loans.  We called IndyMac, local banks, and even mtg brokers.  With our experience...mtg brokers were most helpful!!  Your scores are good enough! So are DH's.   Get in contact w/ a company that will take the highest middle score from you and DH.  Some companies are using the middle score of the person who makes the most money.
With your DH being self-employed you may have to jump through a few extra hoops. Make sure you give yourself plenty of time for the process.  As with self-employment they want to see financials. You may need to know if you live in an area where the market has gone "soft or weak".   Again, call lots of homework....things are changing because of the recent mtg crisis!  This is just my 2 cents worth!Smiley Wink
BTW...ShanetheMortgageMan.....(I am a big fan)...will surely be able to help you even more.  He is the one who will need the important DTI, down pymt, recent credit issues, etc.
Keep in touch, and I can tell ya about some of my experiences on const. loan lenders.....Smiley Surprised I have been actively working on ours since Nov., and I just this week found the const. loan that is going to fit us to a T!!!  Whew!!Smiley Very Happy 
takin' it one day at a time
Super Contributor
Posts: 8,706
Registered: ‎09-28-2007
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Re: New construction home loan???

Hi sarahd,
Like sunrise laid out, qualifying for the construction loan would depend on a lot of variables, including your income (and your husbands adjusted gross income for 06 & 07), your monthly debt payments, how much is owed on the lot & how much it's worth, how much will the construction project costs run, how much would the home appraise for today if it was completed, and what is on your husband's credit report that is bringing his scores down to the mid 600's.  Construction loans are getting harder to qualify for because home values are going down, meaning that when the home is completed, it might not be worth as much as when construction began... with the lender's collateral value declining, they are more reserved in who they'll make construction loans out to.  Your husband, being a builder, will have to qualify in order to build the home... which is called an "owner builder" program.  They usually want to see a track record of past homes he has built, along with references to sub's he's hired, etc.  Most lenders don't permit owner builder's, but there are still some that do.  I know with IndyMac Bank they will require a 680 score from the primary wage earner, but they do have an owner builder program.  IndyMac is also having some financial difficulties, so that might be a reason to be cautious of them.  Flagstar is another good construction loan lender, but from my recollection they do not have an owner builder program.  If Citi's program fits your guys credit & the fact that you want to owner build, they might be a frontfrunner for your situation.  I'd also contact local lenders/CU's as well, as they could have special qualifying construction programs, and since they are in your "backyard" so to speak, they might be more accommodating to have your husband build the home.
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