I am building a new vacation house (2nd house) in PA. I already own the land outright. My current house is paid off (worth $ 700K)… I have no debt and over $ 400K in near-cash assets (savings, 401K, stocks). My wife and I earn over $ 250K/yr. The new house may cost me approx $ 200K to build. I have $ 50K cash right now and should have another $ 50K when I start construction. I need a short-term loan, but more like a line of credit that I use when I need to make payments it and repay every month (not a fixed amount) like a credit card. If I borrow another $ 100K, I can pay it off in a year. I am not looking to touch my savings, so I do want a loan. Even a $ 100K loan for 2 years in interest will cost approx. $ 15K assuming 7.5% APR. What kind of rates am I looking at? What is a good type of loan to get? Should I look for a Home Equity Line of Credit? Traditional Mortgage or Interest only loan and repay off early? Where should I apply for it? My Bank? Online?
should not have a problem as long as every thing else is good
Your score is fine, as long as you meet all the other qualifications of your lender you should not have a problem.
Remember, score is not everything when it comes to credit.
You should be fine as long as you don’t have recent derogatory issues on your reports.
Construction loans are very difficult these days. Mortgage? Depends on how much you have down payment, debt ratios, etc. If you have 20% down plus closing costs saved up, no debt, you should be able to find a mortgage despite the tight markets these days.
There may be some type of constructoin loan available for you. I have used (re-)construction loan programs where the bank lends the money for acquisition of a property, and based upon a constructon/rehab estimate you provide, they escrow funds for construction that you draw upon as needed.
So, as phase 1 of the rehab completes, you submit a request, and they disburse funding to you, thereby increasing your principal balance by the same amount. Most of these programs are interest-only during the construction phase and the principal balance is due at the end of the construction phase (6mos – 2 yrs, depending), although one program I used converted to permanent financing at the end of the construction phase for smaller fees than refinancing.
These same banks had similar programs for new construction, and I’m sure they could handle it if the land was not being acquired in their part of the transaction.
There may be something of use here.
It seems like money, or a monthly payment is not an issue to you at this point… What you are looking for is to pay the least amount of interest on a loan before you can pay it off in full..
Here’s my suggestion..
A home equity line of credit will be at a HIGH rate, and is terrible for your credit… It shows on your crdit as a REVOLVING debt..In other words it shows as a large credit card secured against your house..
I would suggest you take out a traditional mortgae, but you get a 2/28, or 3/27 ARM product… This will give you a much lower rate then a fixed rate loan, which you dont need being that you wont have the loan for long…
As for interest only, if a LOWER payment is a necessity for this loan, then it may be a good option, but if the extra $ 100 per month isn’t a big deal, i wouldnt suggest the interest only…
The reason i say that is lenders charge you a highert rate of interst for the interest only option.. It may be as little as a quarter point on interst, but it can add up to alot of money…
(the less you pay the better!)
As for where to get the loan, here’s my personal suggestion..
Your best bet is to talk with someone that has a portfolio of investors they work with. There are a couple reasons i suggest that:
1. If a loan officer can shop your loan to multiple lenders they are bound to find one or more willing tho lend to you. By looking at multiple options and programs you will be sure to find the lowest costs and rates…
2. If you on your own call multiple banks to see what you qualify for, EACH AND EVERY LENDER will HAVE to pull a seperate credit report. The more times it is pulled the worse your credit gets. Now, when you work with a loan officer that can shop among their investors, they only have to pull one credit report, and use that copy to shop mortgage lenders for you..
So not only do you keep your credit score where it is, you dont have to worry about any of the busy work..you let the loan officer do it for you..
The most important thing to realize is that I as the loan officer with multiple investors to work with, am fully willing to keep shopping to different companies to find the best program for your needs.
My name is Jason Fry, and I am a loan officer with Providential Bancorp, a nationwide mortgage lender. I’d be happy to assist you in a loan, or at least be able to let you know exactly what YOU QUALIFY FOR. You can then make a more informed, and educated decision whether it would be the right move for you.
Feel free to give me a call at 312-264-6448, or
you can email me at [email protected].