Question about a Construction to Perm loan

nixadm · Joined: 27 Sep 2005 Posts: 5

Me and my wife found a house we wanted to build... got setup with the developer, went to the bank and got approved for a 100% usda rural development loan.

We closed on it about a month ago, after they are done building the house we were told there would be a second closing where we would pay more money on interest or something (the modifcation)

There was some problems with the income verification... my wife was not getting all the hours she was supposed to be getting, but we got that resovled. They Claim that at this second closing they will recheck our paycheck stubs. Just recently I had to leave where I was working.. right now i'm doing the same type of work but not hourly on payroll... I am making good money but it will be 1099'd at the end of the year.

My question is, at this last closing what can happen since my pay has changed? can they cancel the loan?

Should I work on getting another loan lined up to take the place of this one?

Thanks alot
-Eric

chow · Posted: Tue Sep 27, 2005 6:15 pm Post subject:

Well- that's a fine kettle of fish! (Don't worry, you didn't plan this event, DID YOU? :shock: as a LO-we hate it when it happens!-Because we are "in it" with you!)

Just tell us you didn't just change jobs, and went from W-2 to 1099 staus on your own-in the middle of a construction loan??? :roll:

Work with the original LO and Lender to resolve the problem of changing loan programs. Your original loan was based on what you both presented to the lender. If you changed jobs in the middle of this-at your own will, you need to accept the responsibility, that you subjected yourself to a new loan program. When you apply for a loan, you make the application in good faith, that you will not change employers-rates of pay, or types of employment. (I have done all of this myself-in the middle of a rehab construction loan-but remained W-2'd, so I was okay-you went to 1099, which "Ain't cool" in the new home market.)

IF they are unable too close the end loan, they should assist you in finding another source of funds to close the loan, so you can move into the home. Your rates will change, and go up-from due to the 1099 and increase Debt to Income ratio- because your employment issues have changed. It's not the end of the world-or the home, as you know it. Can you afford it?

Dig out your original closing documents. It is a two time close, and you will have to recall the conversation you had at that closing, unless you can verify you were both asleep, or under the control of a secret spirit, not of sound mind and body...

Call the Loan Officer NOW! :!: :!: :!: :!: :!:

You paid funds as security to build the home. If you are unable to close on the final loan, you will most likely loose those funds.

Sad, But true.

nixadm · Joined: 27 Sep 2005 Posts: 5

chow wrote:
You paid funds as security to build the home. If you are unable to close on the final loan, you will most likely loose those funds.

Sad, But true.

Thanks for the info..

Those funds would be lost even if I ended up switching lenders and still bought the house from the developer?

What if I was to switch to back to W-2 and supply the bank with current paystubs from the same or different company?

Would they look at the year to date numbers?

I had to change companies because the company I was with did not have any work and I was having to pay him to run my payroll thru.

I have to find a solution or my wife will kill me if this house thing does not work, we have been living with family forever.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

As long as you close on the property you should be fine as far as any cost you put down. Whether it is with the original lender or not.

If you've got good credit there are ways through this. If not, it could be a little tight but that doesn't rule you out completely. YTD figures are of course going to be counted, but with a solid letter of explanation and some details for the time difference you may be able to squeak that through.

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

nixadm wrote: chow wrote:
You paid funds as security to build the home. If you are unable to close on the final loan, you will most likely loose those funds.

Sad, But true.

Thanks for the info..

Those funds would be lost even if I ended up switching lenders and still bought the house from the developer?

What if I was to switch to back to W-2 and supply the bank with current paystubs from the same or different company?

Would they look at the year to date numbers?

I had to change companies because the company I was with did not have any work and I was having to pay him to run my payroll thru.

I have to find a solution or my wife will kill me if this house thing does not work, we have been living with family forever.

I believe what Chow was trying to convey is that if you can't qualify for the final loan and thus, don't buy the house, any money you have spent to this point to build the home is most like going to be forfeit.

As Chow states, it's imperative that you go back to whomever was doing your original loan. There are many occasions where after construction you would go to the title company to do a "modification" of the construction financing to permanent financing. Most modifications do not require that you re-qualify. That being said, a change of employer is likely to pose some problems for you.

The key thing is to find out what IS going to happen. Take all of your paperwork you signed at closing, make an appointment with the original loan officer and explain your situation. If that doesn't work or isn't possible then take all your paperwork to another lender and ask their opinion.

Good Luck!

chow · Posted: Wed Sep 28, 2005 1:59 pm Post subject:

"I have to find a solution or my wife will kill me if this house thing does not work, we have been living with family forever."

Hell hath no fury like a Woman scorned......okay, I would fear her-more than a honest conversation with the LO and Lender who's holding the contruction loan right now. BTW, who is the lender? Maybe we have a AE around who can help too!

nixadm · Joined: 27 Sep 2005 Posts: 5

Thanks for all the help guys

I just have a few more questions..

I have a gut feeling that this lender is not going to be ok with it since we barely got the loan. What could I lose if I got another lender invovled and switched lenders when the original lender denies the final loan?

I'm scared that if I go talk to them they will halt all constrution and our home will be delayed another 2 months while another lender comes into play.

I've already talked to another while we were considering this one.. second lender told me he could get me a better rate.

I'm at 6.25 30 yr fixed. I paid 7500 in closing.

thanks

nixadm · Joined: 27 Sep 2005 Posts: 5

Lender is : First Federal savings bank

https://www.ffsb.com

ken(TX) · Joined: 23 Sep 2005 Posts: 184 Location: Dallas, TX

Nix,

With all due respect, the answers are not going to be had on-line or in this forum. If you are hesitant to talk to your current lender about your situation then talk to a different lender first. Make sure you bring ALL of your paperwork from the first closing and try to interview the loan officer a little bit before you meet them. Make sure they have experience with construction to perm lending, etc.

Nix, you can't change what has happened. I still think you should go back to the original lender. Listen, they don't want to end up owning that house. If there is a way to qualify you based on where you are at RIGHT NOW then they should make every effort to do so.

I think that you need to get some good advice, specific to your situation and transaction. I could recommend lenders in Texas or Oklahoma if the property is located there.

Best of luck,

Ken Stampe

chow · Posted: Wed Sep 28, 2005 6:00 pm Post subject:

"Nix, you can't change what has happened. I still think you should go back to the original lender. Listen, they don't want to end up owning that house."

Your gut feeling is telling you that you are intimidated by the LO? Pack the whole closing package back up, along with the current pay history information, and march your self back into the LO's office, and grab the manager or owner on your way to the LO's office.

I hate to admit this, but when you're in a situation where you are building a home, LO's are going to be a little stiff. We intentionally put you on a tight rope, so the builder and the bank are not stuck with a house-built with your tastes, and you can't close!

No amount of chit chatting with us is going to help you, unless we all decide as a group to give you a swift kick back to having an open line of communication with the people you are already in bed with.

Face it, if you change lenders and LO's now-

We will be "sloppy seconds,"

and I'm here to tell you-my charge for cleaning up a mess is a whole lot more than just the wrath of your wife, and you facing a little song and dance with your current lender. Any LO who's been around the block for a couple of decades will make you weep-all the way back to your current lender.

I'm harsh, and I'm painfully honest when I need to be.

Your LO is human. Last time I checked none of us had horns growing out of our heads, and we normally don't spit fire or brimstone. You should be safe going in and just laying the new doc's down.

Nothing ventured-Nothing gained.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

Quote: Your LO is human. Last time I checked none of us had horns growing out of our heads, and we normally don't spit fire or brimstone. You should be safe going in and just laying the new doc's down.

Chow does however have a pointed tail and spits brimstone, but not fire. Go figure ;)

chow · Posted: Thu Sep 29, 2005 3:58 pm Post subject:

Haplo wrote: Quote: Your LO is human. Last time I checked none of us had horns growing out of our heads, and we normally don't spit fire or brimstone. You should be safe going in and just laying the new doc's down.

Chow does however have a pointed tail and spits brimstone, but not fire. Go figure ;)

Watch it Haplo, I'm in the middle of trying to help another LO do a bail out loan on a gas station....I might just swallow a little free gasoline while I'm there!

Who's my target???

Is he cute and likes to play in the park??? :wink:

Just go back in and see what you can work out, if it looks like you need a little help, venture back here, and we may be able to give you a little hand. I would think there are a few AE's who work for banks watching this post, but they are like us-they won't jump in unless you have given the original lender/LO a shot to keep the deal going.

(Personally, I would worry about your wife's reaction if you didn't do anything to follow up!-Since I am a wife..... 8) )