Construction to Perm Loan

susieque_2007

16 years ago

We are (hopefully) closing soon on a construction to perm loan. I'm hoping that some of you who have been through that can provide some information about the "modification" process. We have just found out that there is a chance (about 50/50)that after the close, but before the construction is complete and modification happens, that our income may be reduced by about 25% due to some possible "job restructuring". If we were starting "fresh" I feel certain we would qualify for the loan we are about to obtain even at the lower income. We would still be comfortable with the payments, etc., and don't want to put anything over on the bank. But...we wont' know for awhile whether this will actually happen, and don't want to delay the project while we wait. I guess my question to those of you who have been through it or know...when you modify, do you have to "requalify", i.e., do they re-verify your income, credit, etc.? Or is it as simple as it is advertised, that you just sign some papers in the mail and send in your modification fee and any money you want to pay down on the permanent loan? Thanks.

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Comments (5)

rhome410
16 years ago
I was told that we'd have to hand in 2 months of pay stubs at the time we convert to a mortgage...Not sure what more there may be to the process, as we're about 6 wks from that yet. I would think they'd want to recheck your credit situation, but I'm not sure.
obwannab
16 years ago
Unless you did a one time close deal, and it doesn't sound like you did, I think you will probably have to be *requalified* for the perm loan. This would likely require a new credit check, and new income verification.

As long as you will still comfortably qualify either way, I don't think you are pulling anything over on them. All you can go with is what you are actually making. It's the only thing you, or the bank, can document. And that word *document* is what's important to them. They can't document possible pay cuts, unemployment, bad health or death.

OTOH, if you think that qualifying would be dicey, should that pay cut come to pass, it might be best to ask the bank to run some numbers based on what you think that salary might be, just to be sure you will still qualify. Different lenders have different ratio requirements, so you might want to find out if you would still qualify for the same rate, terms etc, under the reduced income.

If you have a good relationship with your bank, you might explain it to them, although at this point there's nothing they could do with that info even if you shared it with them.

If it was a matter of you maybe not being able to qualify after the paycut, I'd suggest delaying until the uncertainty is over. That's painful. But it beats the alternative of owing on a construction loan, on a house you can't qualify for.

Just my 2c.
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susieque_2007
Original Author
16 years ago
obwannab - it is a "one-time close" construction to perm. I just don't know what documentation is required at the "modification" stage. I don't want to upset the apple cart at this point, but don't want to be in the middle of construction and then blow up the deal either.

Many deposits already paid, so delaying risks losing some of those. Very stressful.

Anyway, thanks for your thoughts.

SQ
va_rosemary
16 years ago
We also are on the verge of modifying and did a one time close. I got an email last week from the bank saying that these are the things that they will need us:

1) certificate of occupancy
2) homeowners insurance paid one year in advance with a receipt
3) final inspection (I will order once you tell me the house is complete)
4) final accounting form filled out by both you and the builder with the final amount due

Now if I can just get the builder to give us some accurate accounting.....but that's a whole different story!
obwannab
16 years ago
SQ,

That *should* be pretty easy then. Though I've never done a one time close, I thought one of the big advantages of one time close programs was not having to requalify. Maybe you could just call your lender and go over what will be required in the conversion?

Construction to Perm Loan

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rhome410

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Construction to Perm Loan

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rhome410

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