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What type of loan would work best?

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Money Talk > Credit & Loans

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KoltsDad2011
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What type of loan would work best?  Reply with quote  

Hi everyone. First time poster here. I am trying to see what might be the be the best option for me to build a new house. I paid cash for a three acre lot to build a house on for my family. I'm 25 years old. I bought my current house when I was 23 years old. Im about even on it as far as what I owe and what its worth. I was going to plan on renting it once I move to the new house.

I plan on spending about 250k to build the house. Its not as easy anymore to get a new construction loan from banks. I am self employed and I just started my business last July and for most banks they need two years of tax returns for the business in order to give a loan. So if I went that route, they require 25% down I would probably be able to start the loan process in March 2013 and hopefully be ready to start building June 2013.

I would rather start sooner than later. Right now I have about 125k and could probably add about 7-10k a month to that. I am considering not getting a loan at all and start building in a couple months and just pay cash as I go for the house but that would take nearly all of my cash. I am a building/roofing contractor so I will be managing/subbing out all of the work.

Are there any loans other than a mortgage for me to get 50-75k to help finish off what I need and take some of the stress off of trying to come up with all of the money as I go?

I am open to anything. I would love to hear you guys' thoughts.
Post Sun Jul 29, 2012 11:59 pm
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oldguy
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quote:
most banks they need two years of tax returns for the business in order to give a loan. So if I went that route, they require 25% down I would probably be able to start the loan process in March 2013 and hopefully be ready to start building June 2013.
I would rather start sooner than later. Right now I have about 125k


I would keep trying for a construction loan - as you say, 'most' banks need 2 yrs. But some small banks don't - and you have up to 50% for the 'down' plus the paid-for land. Some banker might go for that, especially considering your age. (Obviously a 25 yr old can't have too many years of tax returns.) Your future business could be valuable to a banker, a smart banker might take a chance on you.

And after you complete the construction, you can get the land/house combination appraised (maybe $350k or more) and get a conventional 30 year fixed rate 4% mortgae on it. A US mortgage is the cheapest capitall in the world right now, no other country can give you 4% money and guarantee the rate for 30 yrs. You could probably borrow $300k against the place, pay off part of the rental house if you want to, but use most of it to expand the business - put a few more crews in the field, buy more trucks/equipment.
Post Mon Jul 30, 2012 12:22 am
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KoltsDad2011
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oldguy,

Thanks for your response. I will keep trying to find a bank that might work with me, I've probably talked to at least 10 banks but I will look for some smaller ones. Would you recommend a credit union or bank or does it matter?
Post Mon Jul 30, 2012 1:04 am
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oldguy
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Both. Either one might have the money and be having trouible finding relaiable borrowers - with small local banks/CUs it is based on local supply/demand.
Post Mon Jul 30, 2012 2:01 am
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jakesmith
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Getting loan from banks is good for you. Because banking institutions are providing loan with low interest rates comparing with other lenders. But they can only provide finance for good credit score people. If you need money instantly, it is better to get loan from online lenders.
Post Fri Dec 21, 2012 1:40 pm
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