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Using Land as collateral for a loan

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Anonymous
Not applicable

Using Land as collateral for a loan

I will likely be coming into a sum of money from the sale of a manufactured home I have.  My plan is to move across state lines (about 400 miles).  

At first I was going to do the same thing I did here with a purchase of a home and then find someplace to put it, but I'm thinking that might be backwards.

I've seen some lots in the area for a price I could potentially buy outright.  But it would use up most of the funds I would receive. 

 

What I would like to do is purchase a lot outright then borrow back on it for say $15k to begin with on a lot (estimate the lot will cost between $25k and $35k).  This would allow me to purchase the home, get the foundation done, and get it placed on the lot.  Then refinance it into an FHA or other loan.  The total refinance amount I would be looking for would only be bewteen $30k and $40k over a 15 year (both loans 15 year) which would pay off the lot and allow for remodel/upgrades on the home.  Yes, this would be a manufactured home on a foundation converted to real property.  Although it does limit some lenders, there are a lot of lenders avaialble and more so in Oregon that I have researched.  The goal would be to buy the Lot in June and then take out the mortgage no later than the end of July.


My credit right this second is sitting between 535/560 as far as what CK and Experian tell me.  

Bad:
Student Loans ($26k) showing lack of payments and derogatory.  These date back to 2010 to 2012 and started appearing no later than 2013.

Bankruptcy filed in August of 2010 discharged in November 2010.

Collection - Cane and Wiener ony on Transunion (I know how to handle this one and intend to do so next month).

Collection - Credence Resource Management (Old LLC Account already in dispute, shoudl drop 4/3 was placed around 3/1, found out and disputed on 3/3)

 

Good:

Currently reporting as 8 months on time payments Capital One Platinum Secured Card

Quicksilver One Card just issued, first payment on 4/25 $300 limit unsecured

Credit One Card jsut issued, no idea when the first payment is, $300 limit unsecured.

My only known plans at the moment are to pay off the Secured Card this payment and put it in a drawer out of my wallet.  The Credit One card I intend to pay the annual fee when it arrives and then leave it in the drawer as well because they seem to charge a fee for "EVERYTHING" and I want it there just as a rebuild tool.  

So what are my chances here of being able to use the land as colatteral in this way?  I realize the first loan maybe high interest until I can get refinanced.  

 
Just an FYI, my current home is financed through a private lender and I do not own the lot.  

Thanks

7 REPLIES 7
Anonymous
Not applicable

Re: Using Land as collateral for a loan

So after some reading it seems I would benefit from calling up my student loans and getting into the Rehab program which takes 6 to 7 months the last time I talked to them.  I can do that.

That means I can't do an FHA Refinance for 6 to 7 months which would be 4 to 5 months after I buy the land.  But to be safe I would rather expect a year before I can refinance.

 

So what I would want to find would be a 15 year @ no more than 20% interest that I could refinance without penality in a year?  Would that be realistic I guess would be the question.

I realize there are a lot of questions, like what my score is going to look like by the 15th of next month in general.  I highly doubt Capital One will report the QS One by then, they didn't report the Plantinum until my first statement came out.  I intend to have it at a $0 balance at that time, along with both other cards reporting as 0 for their next statements.  So I should show a DTI of literallly 0% on my next two statements, excluding my student loans.

I expect, if I did everything right, to be low 600's by the time I go to do the loan in July.

Message 2 of 8
NC_Mtg_Loaner
Valued Contributor

Re: Using Land as collateral for a loan

Yeah, remember that student loan debt will never go away until it's paid off.   Deferring only increases the balances when you really need the history of paying them or they'll behave like anchors to your credit score.

 

2/3 of your credit score is derived by how you manage your open and ACTIVE credit accounts, so for this reason NOT UTILIZING credit cards (revolving accounts) is NOT a good idea.

 

 

__________________________________________________

Licensed NC Mortgage Loan Originator
Message 3 of 8
Anonymous
Not applicable

Re: Using Land as collateral for a loan

Oh, I'm using them.  I'm just going to start keeping them paid off every month.  Right now both the Platinum and Quicksilver are near max.  I'm planning to put the Platinum and Credit one in the drawer after paid off and then use just the Quicksilver so I get my cash back to cover the yearly fee.  Just don't want to carry a balance on the other two and save them for emegency.  I'm sure I'll use the Capital One platinum off and on, but after reading all the info on the credit one card honestly I truly believe I am best off just paying the annual fee and considering cutting up the card itself.  If I need to use the Credit One, I can.  Just with 3 I didn't think it would be necessary.

 

I'm not going to defer them again that was only done while I was in college.  There is a program that can rehab them with a payment based on income, instead of the huge payment they want monthly right now that is simply unrealistic.  I was told it takes 6 months to rehab of regular payments then it reverts to the original lienholder but the payments are supposed to remain the same.  That can take up to 3 additional months after the rehab is what I was told and at that time it will start showing paid as agreed as well.  

At least that is what I was told by the agency I was referred to by the Department of Education.  So I figured if I were to call them Monday, get everything setup for the first of April then around January I should be able for an FHA Refinance.

My thoughts were if I can get a piece of land, cash out, that's worth $35k to $40k and only borrow $20k on it.  

 
Then I could refinance in January which would also give me time to somewhat settle in and really think about what work I may want to do on the home.

Message 4 of 8
JVille
Valued Contributor

Re: Using Land as collateral for a loan

How much do you owe on Student Loans or did I miss that part?
Message 5 of 8
Anonymous
Not applicable

Re: Using Land as collateral for a loan

$26k.  Yeah, I might be able to swing paying them off but then I would be without the money I'm using to get setup where I'm moving to and that won't work.

Which is why I'm going to call and get the rehab started.  It's my best bet.

Message 6 of 8
JVille
Valued Contributor

Re: Using Land as collateral for a loan

Asking because I’m concerned about your FICO Mtg Scores. And the affect of a Student Loan (Federal?) in default.
Message 7 of 8
Anonymous
Not applicable

Re: Using Land as collateral for a loan

That's kind of why I'm asking.  I know that regardless of how it affects it the FHA will not let you finance until it is out of default, which will take me 7 to 9 months starting in April.  

But from what I read I couldn't tell how much it affects any form of standard mortgage or using the land as colatteral.    

I know if it was rehabbed my credit score would be higher and I would be in a better position to do this, but I can't change the past.  

This whole move wasn't even planned to happen yet and things just went this way with a lot of other factors involved.

 

I was going to do the same thing I did here which was find a private lot I could rent and pick up a manufactured home that needed moved and get it placed on the lot.  With the amount I am potentially getting I can do that plus a few other things, including eliminating some debt, without a problem.

But if I have the possiblity to buy the lot cash outright instead and then borrow against it to purchase the home and get it placed on a foundation I think it's a much better long-term investment.  

That's why I'm asking these questions.

Message 8 of 8
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