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    b0508's Avatar
    b0508 Posts: 5, Reputation: 1
    New Member

    Jan 6, 2009, 11:59 AM
    Loans in progress and credit score
    Well I have a weird question.

    Last year we took out a construction loan to build a house. So we have a current construction loan and will have to a mortgage on the house when its done. It is at a very small bank. The problem we built on some family land that has been in the family forever.

    The problem we have in the past 6mths our business has had problems and we can't make the payments on credit cards. Now the defaults are showing on my report. The cards belong to the business not my SS but I must have given it for the guarantee. I also have a few we are not paying that are linked to personal. My scores have dropped to 600 now.

    I have advanta taking me to court this month. I am sure amex will soon.
    I have one Collection agency on my report.

    We are still current on my house now but it is for sale.

    I am wonder if the bank where the construction loan is will just role it in to a mortgage with out pulling my credit but if they do what happens when they see the low scores.

    I talked to a lawyer and he said for me to file bankruptcy after we get in the new house.

    My wife is on the loan on the old house and new house. Nothing else.
    Dr D's Avatar
    Dr D Posts: 698, Reputation: 127
    Senior Member

    Jan 6, 2009, 02:33 PM
    The bank will pull your credit in order to process the permanent financing on the new home. With the more stringent guidelines in affect for new mortgages, and your credit score at 600, and headed lower, the bank will probably turn you down for the permanent loan. They will have to foreclose on the construction loan.

    For that reason I have always advised borrowers to get a construction/perm loan with a "one time close". That means that the permanent financing is in place at the start, and only needs a modification once the house is done. That way they can avoid a bad problem if finances have gone downhill during the construction period.:)
    b0508's Avatar
    b0508 Posts: 5, Reputation: 1
    New Member

    Jan 6, 2009, 04:14 PM

    Ok, that is not good so you are tell me I could lose my new home?

    Do you think anyone would write the note?

    So how can I find out if I did a one time close will out asking the bank. I have the paper work I signed. I remember asking the question and he said we wouldn't have to do all the paper work again on the mortgage.
    Dr D's Avatar
    Dr D Posts: 698, Reputation: 127
    Senior Member

    Jan 6, 2009, 05:48 PM
    If the loan officer said that you would not have to go through the paperwork process again, there is a good possibility that you did a one time close, and that the permanent loan is in place, subject to a "modification" upon completion of the house. The most quick way to find out would be to call him/her and ask the question. Otherwise, read all of your loan documents with care to find out.

    If your permanent loan is not in place, it will be difficult, if not impossible to get a new one. Sub-prime lending is all but dead. Your credit problems apparently are caused by a decrease in your income, which would add another hurdle. Most parts of the country are suffering from dramatic declines in property values, so your new home will probably appraise for less that it did a year ago. If the "Loan To Value Ratio" of the new loan was low (because of land equity or substantial cash contribution), it would help the situation.

    Trust me, you are not alone, in suffering because of the economy and the mortgage mess.:)
    b0508's Avatar
    b0508 Posts: 5, Reputation: 1
    New Member

    Jan 6, 2009, 06:38 PM
    I found one paper I am still looking at the others. This one referred to the construction loan as a line of credit. It has related documents checked and has mortgage on the related documents.

    On the stuff on my report I have been disputing the information. I have also filed fraud alerts with the credit agency's. I have considered trying to get help to get the negative information removed but I don't think it could be easily removed.

    Yes you are right I still have a full time job. All the business money is not coming in. I can pay all the personal bills with my check but not the failed business.

    On my new house the loan to value is low. I have enough land to push the value up.
    b0508's Avatar
    b0508 Posts: 5, Reputation: 1
    New Member

    Jan 7, 2009, 01:46 PM

    I talked with the banker today. He said I was pre approved for the mortgage at the signing of the construction loan.
    I ask would we have to go threw everything we did before to close and he said no. Only if we wanted to get a lower rate than what I was quoted in the beginning.

    This house will be a cheaper payment than my current home.

    I was hoping to sell my current house and pay off the other bills before they hit collections. Most of them where business and I wasn't even aware they would show on my personal report.

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