Notices

Mortgage Advice? Brokers?

Old 11-13-2011, 05:00 AM
  #1  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Jan 2004
Location: Sharon Springs, NY
Posts: 4,515
Default Mortgage Advice? Brokers?

I'll admit up front that mortgages aren't my expertise, or else I wouldn't be asking advice on a boating forum

I'm selling my home, buying a new home (actually building a modular home)

I've spoke to my local mortgage banker, I'm not happy with the rate, but it was a construction loan she was quoting me. I'm not sure I need a construction loan.

Are construction loans more expensive (points and rate) than conventional mortgage?

Wife and I have 780 credit and we want to build our new home without selling the old home.

I have some cash, but not quite enough to make the full purchase of the new home without selling the old home. I have equity in the old home that I can use for the new home until the old home sells, but in its totality, when you add up all my credit available and cash available, I'm still a bit short of the new home total cost (which is why I'm taking a mortgage in the first place when the smoke clears)

I have enough cash in my business to pull this off, but don't think I could sleep at night if I raid my business for a lot of money.

  • Should I take the construction loan, at the higher rate and roll it over to a conventional mortgage?

  • Should I borrow money from individuals to complete the home and then get a conventional mortgage?
Why do I see internet rates of 3.75 fixed for 15 years, when my banker quoted me 4.75? Its not my credit score, is she just high? Oh, and her points were higher as well, so that can't be it.

Anyone have more experience then me?
Mike Boehler is offline  
Old 11-13-2011, 05:52 AM
  #2  
Admirals Club Admiral's Club Member
 
Join Date: Apr 2009
Location: Florida
Posts: 16,961
Default

15 Year Fixed right now can be had around 3.075. There is more to it that you/we're missing.
OldPete is offline  
Old 11-13-2011, 06:44 AM
  #3  
Senior MemberCaptains Club Member
 
Join Date: Apr 2007
Location: Atlanta, Ga
Posts: 361
Default

Construction loans are at higher rates and are generally short term notes (12 months) that the bank will hold and not resell. They are loaning you "house money". The rate is generally higher and there is more work for the bank than a conventional mortgage. When you receive a construction loan for example of $500,000, the bank does not write you a $500,000 check at closing. You submit draws based on work completed. The bank will come an inspect to make sure all work is in place and then release your draw. Most construction notes have a fixed time period like 12 months and then you need to find permanent financing. This will be your standard 15-30 year fixed mortgage with a lower rate.

I am not a mortgage guy but I have taken out quite a few construction loans and this is how it works in GA. Of course we also have the highest bank failure rate so what do we know.
franklinscar is offline  
Old 11-13-2011, 07:11 AM
  #4  
Admirals Club Admiral's Club Member
 
Join Date: May 2008
Location: Between Richmond and Williamsburg
Posts: 2,964
Default

Not sure why you wouldn't shop around for the best deal for a mortgage. But as stated above, const loans are generally higher for the reasons stated above. If you did the $500k const loan, you pay interest only on the amount you have withdrawn. In other words, if your first draw is $50k, that is what you pay the interest on. By the time you get to the end, you interest payments will be higher. Many banks offer const-perm loans. In other words, they will give you the const loan only if they get the perm loan. These are normally your best deals. With your credit score and finacial situation as you described, you should be getting the best rates available.. Remember, when banks compete, you win.
twobyfour is offline  
Old 11-13-2011, 07:26 AM
  #5  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Jan 2004
Location: Sharon Springs, NY
Posts: 4,515
Default

Originally Posted by OldPete View Post
15 Year Fixed right now can be had around 3.075. There is more to it that you/we're missing.

I'm not sure why the local Brick and Mortar bank is so high, the only variables that I'm certain of is my cash available, my new home price and my credit score.


Originally Posted by franklinscar View Post
Construction loans are at higher rates and are generally short term notes (12 months) that the bank will hold and not resell. They are loaning you "house money". The rate is generally higher and there is more work for the bank than a conventional mortgage. When you receive a construction loan for example of $500,000, the bank does not write you a $500,000 check at closing. You submit draws based on work completed. The bank will come an inspect to make sure all work is in place and then release your draw. Most construction notes have a fixed time period like 12 months and then you need to find permanent financing. This will be your standard 15-30 year fixed mortgage with a lower rate.

I am not a mortgage guy but I have taken out quite a few construction loans and this is how it works in GA. Of course we also have the highest bank failure rate so what do we know.
I wonder if the construction loan produces a higher mortgage in the end? I can see the construction loan being a good tool, but if I'm going to pay for it for the full term of my loan, I'm going in a different direction

Originally Posted by twobyfour View Post
Not sure why you wouldn't shop around for the best deal for a mortgage. But as stated above, const loans are generally higher for the reasons stated above. If you did the $500k const loan, you pay interest only on the amount you have withdrawn. In other words, if your first draw is $50k, that is what you pay the interest on. By the time you get to the end, you interest payments will be higher. Many banks offer const-perm loans. In other words, they will give you the const loan only if they get the perm loan. These are normally your best deals. With your credit score and finacial situation as you described, you should be getting the best rates available.. Remember, when banks compete, you win.
I'm not sure where else to look. I get emails daily from mortgage companies, also see them on every internet banner on every web page I visit, but I seriously don't trust most people, let alone, most banks. I would need a recommendation from someone to pursue a bank.

I suppose, a question would be, do I need a mortgage broker to sort this stuff out for me?
Mike Boehler is offline  
Old 11-13-2011, 07:29 AM
  #6  
Senior Member
 
Join Date: Nov 2010
Location: Crawfordville, Fl
Posts: 502
Default

You might consider a home equity loan (i.e. second mortgage) on your existing home if you have equity in that home. When your new home is built you can take out a new mortgage and pay off the home equity loan.
Dark Rumor is offline  
Old 11-13-2011, 07:34 AM
  #7  
Senior Member
 
Join Date: Nov 2010
Location: Crawfordville, Fl
Posts: 502
Default

Your bank should be able to offer you a construction loan with a mortgage. The construction loan will end when the house is complete and the mortgage will be used to payout the construction loan. You should have the rates locked when you sign for the loan.
Dark Rumor is offline  
Old 11-13-2011, 08:22 AM
  #8  
Senior MemberCaptains Club Member
 
Join Date: Apr 2007
Location: Atlanta, Ga
Posts: 361
Default

Personally I would find a small local bank close to the house site. The kind of bank where you can walk in and talk to the president or senior level executive of the bank. This is not the type of situation you want to go to a Mega Bank for. The interest rate would be my last concern on a construction loan (within reason). You want a bank that will work with you and provide good customer service especiallly in regards to the inspections for draw payments. A good bank will get these done in a couple of days, a bad bank will get these done when they get around to it. Your carry cost on the construction loan is so small for exactly the reason twobyfour said. you only pay on what you've drawn. If you have a good bit of cash, set up your loan, start the house out of your pocket, and only start drawing from the bank when you get low on your cash or get tired of spending it. Depending on the amount of money borrowed, you are talking a $1000 difference on the "lower rate" vs "higher rate". Generally, in your situation, the construction to permanent loan is the way to go and will save you some closing costs.
franklinscar is offline  
Old 11-13-2011, 09:21 AM
  #9  
Senior MemberCaptains Club MemberPLEDGER
 
Join Date: Dec 2004
Location: St Joe Bay / Lake Talquin
Posts: 2,573
Default

Originally Posted by franklinscar View Post
Personally I would find a small local bank close to the house site. The kind of bank where you can walk in and talk to the president or senior level executive of the bank. This is not the type of situation you want to go to a Mega Bank for. The interest rate would be my last concern on a construction loan (within reason). You want a bank that will work with you and provide good customer service especiallly in regards to the inspections for draw payments. A good bank will get these done in a couple of days, a bad bank will get these done when they get around to it. Your carry cost on the construction loan is so small for exactly the reason twobyfour said. you only pay on what you've drawn. If you have a good bit of cash, set up your loan, start the house out of your pocket, and only start drawing from the bank when you get low on your cash or get tired of spending it. Depending on the amount of money borrowed, you are talking a $1000 difference on the "lower rate" vs "higher rate". Generally, in your situation, the construction to permanent loan is the way to go and will save you some closing costs.
Good advice if I may add to it. Some small banks don't have the flexibility to offer construction to permanent mortgage. Google 4 sale by owner they have brokers that are pretty sharp on how to get things done. I have used thema few times and got better deals tgen the back even thought about offering. But you can always go to your bank president and have a sit down come to terms meeting. Your current business dealing should be enough for the bank to get right with this. Bankers hate to see any solid account go away in these times
fldmax is offline  
Old 11-13-2011, 10:18 AM
  #10  
Senior Member
 
Join Date: Sep 2009
Posts: 6,069
Default

Self employed looking at the potential of having 2 houses with mortgages in a falling market.


I would talk to the bank that takes care of your business accounts. My guess is being familiar with you situation they'd be the most flexible.
gort is offline  
Old 11-13-2011, 12:28 PM
  #11  
Admirals Club Admiral's Club Member
 
Join Date: Jul 2006
Location: Bermuda
Posts: 892
Default

Building a house now so instead of pulling money out of investments I borrowed half the money. Construction loan at 5% interest only. When house is complete they will roll it into a mortgage at 3.55 for 15 years. BB&T local bank in my area.
edale99 is offline  
Old 11-14-2011, 05:11 AM
  #12  
Senior MemberCaptains Club Member
 
Join Date: Jul 2005
Location: Long Island Sound, CT
Posts: 24,451
Default

First Niagara bought NewAlliance so I am not sure if this still applies, but NewAlliance used to have the best contruction to permanent loan program going.

There are additional processing costs for inspections along the way and then a final inspection. Not more than 1K however.

Give them a call I believe that they close in states other than CT.
fichtion is offline  
Old 11-15-2011, 06:15 AM
  #13  
Admirals Club Admiral's Club Member
 
Join Date: Jun 2011
Location: Hattiesburg, MS
Posts: 5,013
Default

OP 4.75 is definitely high. I work for Quicken Loans, the nations largest online mortgage lender so that rate is definitely out of line.

We have a great referral program and you can speak to one of our President Club bankers if you like to get some advice. Just PM me your Name, Phone and the state you live in and I can put you in as a referral which gives some extra perks.

One thing we have that no one else has is called a YourGage where you define the terms of your loan. A lot of our clients are going with this option today as it gives you the flexibility you need. You can read about it and watch a video on it here:

http://www.quickenloans.com/home-loa...tgage-yourgage

-Keith
keithelder is offline  
Old 11-15-2011, 04:37 PM
  #14  
Senior MemberCaptains Club Member
Thread Starter
 
Join Date: Jan 2004
Location: Sharon Springs, NY
Posts: 4,515
Default

Originally Posted by fichtion View Post
First Niagara bought NewAlliance so I am not sure if this still applies, but NewAlliance used to have the best contruction to permanent loan program going.

There are additional processing costs for inspections along the way and then a final inspection. Not more than 1K however.

Give them a call I believe that they close in states other than CT.
Thanks

First Niagara holds some equipment financing of mine. Been a good relationship.. I pay the bills and I never hear from them
Mike Boehler is offline  
Old 11-15-2011, 06:14 PM
  #15  
Senior Member
 
Join Date: Sep 2009
Location: Georgia
Posts: 2,033
Default

I've been in the mortgage business for the past 18 years. Franklinscar had very good advice. 4.75% is not bad for the construction phase. Maybe not the lowest in town, but not bad. When you get ready to convert to the permanent phase, then you should be getting "market" rates - although many lenders will make the permanent rate slightly higher than market. This is because they know that if you choose to get your permanent financing somewhere else by refinancing that you will pay more closing costs.
SurfFishLife is offline  

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are On
Refbacks are Off


Thread Tools
Search this Thread