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Can I get a Construction Loan on an Underwater House

I'm underwater on my house but have no problems paying the mortgage.  We have some credit card debt but still very manageable.  I refinanced once under HARP 1.0 and therefore I'm not eligible for HARP 2.0.  My house is a ranch style with a basement.  I'm thinking a second floor on the house would help that Loan to Value ratio even with a loan to finance it.  Just not sure how easy it is to get that construction loan in my situtation.  I've never been late on my mortgage since purchasing the home, even before the refi.

  • November 15 2013 - Colonia
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Answers (8)

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  • August 26 2014
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Profile picture for sunnyview
It seems unlikely that a lender would be willing to extend an additional loan on an underwater house for renovation. You may be able to get a personal loan or a different kind of loan for improvements, but the interest rate is likely to be higher than it would be for a HELOC or second.

Talk to a few lenders and see if they have suggestions. You also may want to talk to a local agent about the current value or your house. Zillow is a great tool, but not always up to date so get the numbers first so you know what you're dealing with.
  • August 13 2014
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Profile picture for mcnater9
Did you ever get a good answer on this? What did you do? I am in the same situation as you.
  • August 13 2014
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You have options, however, I would avoid certain renovation loans (such as the 203k) unless it were your only option. They're great loans, however, there are better programs which can allow you to do the same, if not more, repairs and pay less since FHA comes with costly mortgage insurance.

If you are currently underwater we will need to discuss the specifics of your scenario to determine the feasibility. Being that renovations are being performed, the value will be based as if the work was completed which could potentially eliminate being underwater. These loans are my specialty and it's of utmost importance that we go over all renovations you'd like to perform to ensure we will not run into a value issue.

Please contact me at your earliest convenience  so we begin weighing out your options. My contact information can be found within my profile and am available via phone or email; whichever is easiest for you.


Kindest regards,

Paul F. Marzolla
Sr. Mortgage Advisor
-----------------------------
Licensed by The New Jersey Department of Banking (NMLS#922891)
Member of The National Association for Mortgage Professionals
Member of The New Jersey Real Estate Investors Association

  • November 18 2013
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HI 

Under fha 203k program you should be able to get construction loan and  loan to value(LTV) will be based on the completion value . 
  • November 16 2013
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My company does this type of renovations all the time.  We have government renovation loans that allow us to go up to 110% of the as completed value. 

So we would need to figure out how far underwater you are currently, and see if it all makes sense.  But it is possble to add a 2nd floor. 

Feel free to reach out to me through my profile.  Best of luck!
  • November 16 2013
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I have a friend who was more or less in the same situation as you. He did not qualify for HARP but was eligible for the FHA Streamline program. This is less cumbersome than a normal debt and sometimes may be the only option so as to avoid a foreclosure. If all else fails, try a short sale. In a short sale, the house is sold at the current value and the bank agrees to forego the balance. Many banks are willing to go ahead with this and it helps in your credit history. Good luck to you!
  • November 16 2013
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Do you plan on selling after the new level is added? Regards,
  • November 16 2013
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