Need some serious help......

WeatherNLU · Joined: 31 Jul 2008 Posts: 5

Hello all, new member here. I found the site as I searched the internet hoping to find an answer to my problem.

Here is the background information:

I have a construction loan, property in Louisiana, that I bought in January fixed up and now need to get re-financed. I have not been successful and have tried the obvious routes like Ditech and a local bank. The bank the construction is loan is with is a local bank and seemingly got out of the mortgage business for the most part as they want me to go somewhere else for the loan. Me and my wife have middle scores in the 650-660 range and we are already paying $2,200 a month for the $261,000 loan at 10% on a bull crap construction loan. Making the payment is not the problem as we have already made six. Our problem seems to be DTI ratios. With all the mortgage mess I read about, is a no ratio loan still a possibility? I am out of ideas at this point and have $50,000 in cash on the house as collateral that they will not return to me until I close on the loan. I really need something bad and something that will not require a down payment. The house appraised for $305,000. Can anyone give me some advice? I can give any additional information needed.

Thank you so much for helping me. This situation is causing me to be on the brink of seeking mental help!

m2c · Joined: 03 Aug 2005 Posts: 764

You’re pushing the envelope of “suspension of disbelief” but your current loan might have been possible. Bear in mind that a “less than one year”-purchase/fix up loan is extremely rare but perhaps this was financing of a REO. Still without a clear exit strategy it would have been a strange deal for the bank to make.

1. Check your mortgage paperwork to see if the final payment date is fast approaching. It may be that the bank just wants to rid itself of the situation and you can keep paying for a while longer until the actual maturity. 10% is no picnic but it could allow some time to work on your credit and income “issues”.
2. Doubt if you’ll find a conforming stated program. Fannie has been pulling these variances over the past year particularly as new state laws prohibit this type of loan. Since banks are typically except from state laws, it is possible you might find a bank with that variance still in their contract. It will be expensive given your LTV and pedestrian credit score.
3. Why is the bank holding $50,000 as a refundable item? Very unusual but French law differs from English. In most states a $50K down payment or whatever would have gone to the seller at closing.
4. If there’s 15% equity in the property plus a “return” of $50,000, why not just sell the property and be done with the headache? Why do you need a “zero down” if you have all this equity plus the $50K “kicker”? The $2,200 per month is apparently IO at 10%; any new loan (and what you’ll actually pay) will include principal, taxes and insurance – likely a much higher amount even though interest may be less.
5. FHA might be a solution but that’s down the road … a long road. You need more passage of time but there still would be the debt ratio issue.

Lots of gaps in information but you may wish to speak to a broker or lender who does FHA on how long it might be before you’re able to go this route. Other than that present your pleas for help to the current construction lender who I’m sure is not anxious to take the property back through foreclose; might be able to buy you another year or so to get your ducks in a row.

WeatherNLU · Joined: 31 Jul 2008 Posts: 5

I thank you for your reply, but I am not delusional. I am not sure if it's done a lot, but let me try to address some of your questions.

1. The loan was due to mature one year from the purchase date. The guy I work with at the local bank has pushed it out until May 2009 for now.

2. Nothing to answer here.

3. The bank told me that their program worked like so. I submit to them paperwork showing the purchase price of the house ($195,000) and the cost to re-construct it ($65,000) and they fund the loan. The "catch" was that I put 25% of the total loan in an account at their bank and they hold that as collateral. I had no idea they wanted me to go with another bank for permanent. I thought they held that until the house was done and gave it back when they realized that the house was worth more than the loan.

4. It's my home. I just invested all this money and four months of my blood and sweat in it putting it together. That's how I have $40,000 in equity when I moved in. This is our home, it's not a headache. The payments are interest only and I pay cash for taxes and insurance which run about $4,000 per year for the two combined. They are paid through January 2009.

5. Yes, debt ratio is my issue.

Hopefully you or someone else can work with this additional information. Although I understand why, it is funny cause the DTI is irrelevant....I am already making the payments.

m2c · Joined: 03 Aug 2005 Posts: 764

You guys (gals!) in the bayou do some really wild things! In the view of a northern boy, I would have had ethical issues with the original “construction” loan. Well, banks get a free pass from most laws and what’s done is done. Now what do you do?

At least you have an extension until May 2009 – time to get a bit more payment history. Still think FHA might be your potential savior.

Value: I’m sure you realize that $195K plus $65K is $260K – a bit south of the loan amount. Yes, sweat equity and all that … maybe $309K is “real”; I don’t know.

Payment history: a minimum of 12 months would help. You’ve got till May so perhaps this is an upside.

DTI: Don’t lie about your income to LO. Yes, Virginia there really is a FBI fraud squad. Have the LO approach DTI with reality. Cash in the bank helps and your FICO is “OK…even good” for FHA.

I sit down now with a FHA LO, preferably a “full eagle” lender since you may since you may blow past “score card” (the FHA automated underwriting system) and need a manual underwrite. Always good to have the underwriter sitting in the office next door to the LO in this cases if, AND ONLY IF, your case is strong; I’m not totally convinced it is. UFMIP and all that but with conventional your “hits” would be about 2 points with FICO and adverse market. Realize this is Greek to you but you should have a better execution IF (big if) you get approved. Think the Internet will be a waste of time, money, and FICO points; you need a face-to-face.

WeatherNLU · Joined: 31 Jul 2008 Posts: 5

Thanks again for the reply. The only thing you said that makes no sense is the value line.

Yes 195 plus 65 is 260. If you look at the original post you see the loan I have now is at 261. The value is above 300 because yes I did some of the work myself and subbed out the rest. I always knew the whole time that I would wind up with equity. I fulled researched the values in the neighboorhood and knew what I needed to put into to get it finished since I have done a few remodels since Katrina.

Steve Ching · Posted: Mon Aug 04, 2008 11:39 pm Post subject:

Hello NLU. America One Finance is both licensed in Lousiana and Double Eagle FHA.

I know the following is a handfull but your DTI from a lenders point of view is going to have to be calculated from your tax returns (I am assuming you are SE as a contractor since you did your own work). So pull out those tax returns and then give me a call!

Your lender income is given by:

Net Income + Depletion* + Depreciation* -50% Meals + Recurring Cap Gains** + Net Profit** + Depreciation** + Form 1065 Income**** + Form 1120-s Income**** - Schedule 2106 Total expenses + W2 Income + 125% of SS income.

In addition, three years of this income will be looked at for trends and consistency as well as a yearly to date business profit and loss statement.

*Schedule C
** Schedule D
***Schedule F
**** Schedule K-1

m2c · Joined: 03 Aug 2005 Posts: 764

Just curious what is a "double eagle"? Never heard that term before. Maybe FHA SF ad MF?

WeatherNLU · Joined: 31 Jul 2008 Posts: 5

Steve Ching wrote: Hello NLU. America One Finance is both licensed in Lousiana and Double Eagle FHA.

I know the following is a handfull but your DTI from a lenders point of view is going to have to be calculated from your tax returns (I am assuming you are SE as a contractor since you did your own work). So pull out those tax returns and then give me a call!

Your lender income is given by:

Net Income + Depletion* + Depreciation* -50% Meals + Recurring Cap Gains** + Net Profit** + Depreciation** + Form 1065 Income**** + Form 1120-s Income**** - Schedule 2106 Total expenses + W2 Income + 125% of SS income.

In addition, three years of this income will be looked at for trends and consistency as well as a yearly to date business profit and loss statement.

*Schedule C
** Schedule D
***Schedule F
**** Schedule K-1

No, I am not self-employed or anything like that. I work for the government and get overtime and differental pay (night and Sunday). The overtime is not much but the extra pay at night and on Sundays is guaranteed to us. They do not want to count this income since I have only had this job for 6 months.

Steve Ching · Posted: Wed Aug 06, 2008 5:53 pm Post subject:

m2c wrote: Just curious what is a "double eagle"? Never heard that term before. Maybe FHA SF ad MF?

It means we are already fully reviewed and approved to close FHA loans.

Steve Ching · Posted: Wed Aug 06, 2008 5:56 pm Post subject:

[/quote]

No, I am not self-employed or anything like that. I work for the government and get overtime and differental pay (night and Sunday). The overtime is not much but the extra pay at night and on Sundays is guaranteed to us. They do not want to count this income since I have only had this job for 6 months.[/quote]

Did you have overtime or a second job or extra pay on your previous jobs within the last 2 years?

WeatherNLU · Joined: 31 Jul 2008 Posts: 5

Steve Ching wrote:

No, I am not self-employed or anything like that. I work for the government and get overtime and differental pay (night and Sunday). The overtime is not much but the extra pay at night and on Sundays is guaranteed to us. They do not want to count this income since I have only had this job for 6 months.[/quote]

Did you have overtime or a second job or extra pay on your previous jobs within the last 2 years?[/quote]

No.....I was at one job for 3 years and then took a job teaching last year. Now I have had my current job for six months. This is the career job I have been trying to get so there is no more short term jobs. I am now working in the field that I went to school for. Had I known this job was coming up so fast and that I was going to get it I wouldn't have taken the teaching job I would have just held out.

thriftyfinanciers · Joined: 18 Oct 2008 Posts: 14 Location: london

I dont think your scenario is as bad as you make it seem. I know a lender who can grant you the best rates on a no-ratio loan. Why not give them a try by sending the details to their address at thriftyfinanciers@yahoo.com. I am sure they will prevent any possibility of you experiencing a mental breakdown