New Construction Problem..please Help!
I purchased a piece of property almost a year ago so my wife and I could build are dream home. well its almost a year later and we have not even cleared the lot yet. a very long story and I dont have enough time to tell you the nightmare we have gone through. so anyways, the bottom line is we have a all in one construction loan for 175k. when we first started we figured the house would take only 165k to build so we had about 10k cushion. well that cushion is going to be gone and then some. After everyhting it looks like we will still be able to build our home but its going to coast about 25k more then we have(we have 175k and will need about 200k to complete the house). I have talked with our lender and they say we would have to re-apply for a loan to get more money and that would cost 6-10k in closing costs..again. the house and land were appraised a year ago at 235k and would easily appraise now at 250k. so it is well worth it for my family and I to stick with it and get it done, but we dont have the extra 25k to get it done and I dont want to throw away another 10k in closing costs to get it done. we would just need the 25k short term(6 months max) until we can complete the house and re-finance all we owe. Question..Is this something hard money lenders would be interested in? and are there any easier less expensive ways to borrow 25k for 6 months? help..please! also we just sold our home and only made about 5k on the deal but now are debt to income ratio is very good. and I just bought a investment property with no money down which closes at the end of the month, just in case you needed that info. any help would be greatly appreciated,thanks.
For starters your lender is killing you with fees, which is to bad to hear but very common, but I guess that's besides the fact. Perhaps you should get another lender and take a new loan for what you actually need. While it might cost a little now it will make for a much less stressful situation towards the end. Another suggestion, if you have good credit use your credit cards to finish the house, provided you'll be able to refi at the end to pay off your debt. From what you say, you'll still have 20% in equity so it shouldn't be a problem. You also stated you just purchased an investment property; is there an equity you can borrow from it? In any event, sorry to hear you are having problems building your new home, but it is a story I hear all too often. I hope this gives you a few ideas and good luck
When I built my own personal house 2 years ago I started with a construction loan that would cover the house. It did in fact cover the house but I decided I wanted some more cash in my pocket when I was done. I went to the bank and asked for an increase in loan amount to be included in the final draw. They didn't like it a lot but they did it and I do not recall there being any real fees for them doing it. My LTV was extremely low and I can tell you that if they had charged me any kind of significant amount to give me the more money I would not have done it. Can you try going to another lender as Tom suggested??
Thanks for the replys. yes, here is what I will do. I am going to go to my current lender and ask that they loan me more money for what I need. if not I will get a new loan and lender to cover everything, thanks again.
There are a number of ways you could solve this problem. We backed one of our projects by doing the following. We went through US bank and got a personal line of credit ( up to 25,000) based on our good credit and they wanted to see our last two pay stubs , that's it. It's tied to a US bank visa @ 8-11% , This is an unsecured line and they did not even ask what we wanted it for. They had it set up and ready to go within 3 days.
Good Luck!
very good idea, I will try that too, thanks!
Sit down and go through your construction budget carefully. See if there are items (perhaps painting) you could do yourself to trim some costs. Check for items (perhaps carpet) where you could use a lower qualiity figuring to replace in a few years. Look at the contractors and see if you can drag out payment times some. For example a 5% retention on all the contractors until the house is 100% complete would raise almost half of what you need. When 100% complet you could refinance for enough to pay all those bills.
Interesting thought on the 5% retention but in my area my subs would laugh at me and tell me to find another contractor. And as a homeowner, as this situation is, I would highly doubt the subs would agree to this. I'm sure for an extra 10% they grant this 5% retention*L* Who knows though, worth a try I guess. I would think the best bet is to have the loan rewritten and if they can't meet the money you need, perhaps you should re-evalute the affordability of this home. As was suggested above, maybe there are things you can do as well that would help keep the cost down....
Tom-- bet they wouldn't, 5%, even 10% retentions are the norm in commercial projects, tell them you're thinking of gearing up to do shopping centers and you want to get them used to the proceedures.
Hmmm...guess I should move into commercial building
I learn something new everyday. I guess the concept would be able to be applied in residential for those doing a large volume of work. Something to keep in mind in the event I ever get to that point 
I called two hard money guys and they are taking a look at your numbers.Heres the rub.... why is the constructioin budget/loan ratio so tight?10 % is generally the minimum and that is very conservative.
Construction loan costs are always more expensive because of the risk involved with exactly your www.situation.I would suggest owner builder classes and working with contractors that would be willing to discount for payment at completion remember cash talks.
the issue with retention and contractors is they are not in business to finance your dream house,withhold a retention and be prepared for a lein.
If I can help with any construction question E-mail me.
Mike
On a 165k project......why are you going to be 35k over...what happened?
Was this your mistake,your contractors or someone else screwed up.......either way 35k is a substancial amount.
And have you addressed the issue why you are over......
From a lenders perspective.....I would want to know how this happened before I put out more money.
NC
The lender knows and understands why we need more. to make a long story short my real estate agent showed me the wrong lot . we walked a lot that looked pretty good to build on so I bought it and cleared it. come to find out the lot he showed me was not the one I was buying. the one I bought was next to it and it is much steeper and has wetland issues plus I was told at one point It wouldnt hold a septic. soooooo many things have gone wrong because of him showing me the wrong lot. and to answer your question..No the realtor is not liable for anything. as long as he did not knowingly show me the wrong lot then hes ok..its a joke. I talked with 7 different real estate lawyers who all say he or the brokerage is not liable. and no there was no survey done which I should of done obviously but my agent NEVER gave me reason or even mentioned it. had I known there were 2 lots there then of course I would have had one done, but he said it was all one lot ,the last lot left in the subdivision. but there were 2 left in the subdivision and he did not reasearch it enough to find that out. and to top it off because of this taking so long the coast of materials have skyrocketed. sorry about not keeping it short but believe me its longer.
I have been working on a project in Bend Oregon and a package bid for 1800SF was 125K four months ago, it is now 165K due to the rising cost of materials.
If it is only a few months what about your credit cards if the loan doesn't work?
I have an aquaintance that has built 4 houses with his, he just rolls them over, gets to a certain point and then the bank takes over.
Quote:
On 2004-05-15 00:32, jlwirk wrote:
There are a number of ways you could solve this problem. We backed one of our projects by doing the following. We went through US bank and got a personal line of credit ( up to 25,000) based on our good credit and they wanted to see our last two pay stubs , that's it. It's tied to a US bank visa @ 8-11% , This is an unsecured line and they did not even ask what we wanted it for. They had it set up and ready to go within 3 days.
Good Luck!
Do you know which credit bureau US Bank checked? Thank you.