cancel
Showing results for 
Search instead for 
Did you mean: 

Advice on refinancing a construction loan (Texas experts welcome)

Ausfarm
Regular Contributor

Advice on refinancing a construction loan (Texas experts welcome)

I live in Texas and have a construction loan that I will be "refinancing" into a permanent mortgage.  I will be seeking a conventional mortgage.  Although I basically have a lender, I'm thinking I should shop around to make sure I'm getting the best deal on the mortgage.  (Note: I will have to pay a money penalty if I move lenders, so I'm thinking it's unlikely I'll get a better deal, but it can't hurt to check).  I plan on applying in the next 2-3 weeks.  Currently, trying hard to get FICO mortgage score above 760 (FICO 8 Scores are Equ 798, Transunion 798, ad Experian 785).  There seems to be disconnect between the fico mortgage scores and the fico 8 scores, but according to the simulator I should be able to get my FICO 8 score into the exceptional territory which I assume means I'll likely achieve the fico mortgage score of 760 score that I want.

 

First question: I am thinking of doing a cash-out refinance.  Wondering if the fact that I'm refinancing a construction loan would create an any issue here?   (Because of price hikes in the last year and a local construction boom, I had to dip into savings to supplement the build and would like to replinish a little bit.  Also, I have a few more improvements I would like to make/finish out post-closing).   The value of the home has almost doubled in the time I've had it built so I anticipate having a lot of equity.  

 

Second question:  I know that my applications would all need to be done in a two week period, but I don't know who to apply with necessarily.  I typically bank with a credit union and planned to apply with them, but if anyone else has any recommendations generally for the types of lenders and/or brokers one should apply for, I'm all ears.  Is it even worth it to apply with the big guys like Chase and Rocket Mortgage?  

 

Any advice is appreciated.  Thanks in advance for your help.

 

  

Message 1 of 5
4 REPLIES 4
mike-fico
Established Member

Re: Advice on refinancing a construction loan (Texas experts welcome)

Do you mean you have a construction loan that will convert into a conventional mortgage?  That's more typical.

Usually, with that, it also means you have an interest rate that is already determined at the time of the construction loan, all the qualifying is done at that time as well.  Is that the case for you?  If so, switching to a different lender may mean you have to start all over and go with a current interest rate. 

Do you expect if your credit position improves you could improve your interest rate?
You may wish to look at your current loan documents or purchase agreement to make sure you don't lose some credits related to using their lender.

 

Message 2 of 5
Ausfarm
Regular Contributor

Re: Advice on refinancing a construction loan (Texas experts welcome)

No, I don't have a construction-to-perm loan that will convert.  I have a construction only loan, but in order to secure it I had to qualify and get approved for a conventional loan.  I have a unique situation where it doesn't make sense to do a construction-to-permanent loan.  The expectation is that I would basically update my application when it came to seek permanent financing for the home.  The paperwork states that I'm free to find other financing, but will owe them an additional fee if I don't use the construction lender's affiliated lender for the permanent loan.  I will, however, take a closer look to make sure there are not other ramifications.  

 

My credit rating was good before but should be better now.  My DTI is also in a much better position that it was when I originally qualified for the construction loan.

Message 3 of 5
VALoanMaster
Valued Contributor

Re: Advice on refinancing a construction loan (Texas experts welcome)


@Ausfarm wrote:

No, I don't have a construction-to-perm loan that will convert.  I have a construction only loan, but in order to secure it I had to qualify and get approved for a conventional loan.  I have a unique situation where it doesn't make sense to do a construction-to-permanent loan.  The expectation is that I would basically update my application when it came to seek permanent financing for the home.  The paperwork states that I'm free to find other financing, but will owe them an additional fee if I don't use the construction lender's affiliated lender for the permanent loan.  I will, however, take a closer look to make sure there are not other ramifications.  

 

My credit rating was good before but should be better now.  My DTI is also in a much better position that it was when I originally qualified for the construction loan.


Hi @Ausfarm,

Just a heads up, you do not need to apply with a lender to get a rate quote when shopping lenders.

A lot of lenders will tell you that they need a complete application and a credit report in order to quote you a rate and it's just not true. 

Also, cash-out refis are different here in Texas but still easy to get done.

 

VA Mortgage Expert. Mortgage Banker lending in All 50 States.
VA, FHA, USDA. Jumbo, Conventional.
CAIVRS Expert.
Message 4 of 5
Ausfarm
Regular Contributor

Re: Advice on refinancing a construction loan (Texas experts welcome)

I did not know that.  Thank you for the information!

Message 5 of 5
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.