Profile picture for tony_673

Construction to FHA or USDA loan help needed

My wife and I are looking to build our next home in a rural area and need financing advice. We're getting different stories from each bank/mortgage company we talk with and it's becoming quite frustrating.

The home we are currently in is under water by around $10k and financed through an FHA loan (8 years in). We are considering renting it out in order to move on to the our next home.

The total cost for the next home will be around $180K with the lot included in that total price.  

We would like to utilize the FHA or USDA loan program again if possible due to my credit score (unless someone has a better option). We've been told that we could not have two FHA loans at the same time unless we meet certain criteria that we do not at the moment. (We did have a mortgage broker insist that he could finance us with the two FHA loans even without meeting those criteria, but only on an existing structure as he does not deal in construction loans.)

Our builder will not carry the loan or costs of construction during the process, so that is out of the question. The same mortgage broker mentioned above stated we could also count the income generated by the rental as income so long as we had a signed lease agreement. Others have told me this is not true.

Here's a bit of info to help:

- Middle credit score of 684
- Total gross monthly income: ~$5,400
- Current DTI: 28%
- Cash available: ~$13,000

Anyone have any advice on how to make this work? Should we refinance our existing home OUT of an FHA loan? Is there a better option for the new home instead of an FHA loan? We really need this to happen within this current year.

Thanks!
  • April 16 2013 - Euclid
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Answers (4)

Profile picture for rick heidi
You could try listing your current home for $20k (you may also have to add in the real estate commission, if selling through a realtor) more than you owe on it but offer to owner finance $20k. This will attract buyers who don't have the necessary down payment (your financed portion will appear as a down payment to a bank) and cover your shortfall. This scheme would ultimately rely on a generous appraisal from the buyers, but you could also report the financed portion as income towards the new property.
  • October 16
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A) Unless you sell your current home, you will not qualify for a USDA loan.  You cannot own "adequate housing" unless you can document a legitimate relocation scenario.
B) You will be required to count the existing mortgage in your ratios, unless you can document proof of property management.
C) Unless you can document an increase in family size or a legitimate relocation scenario, you cannot have (2) FHA loans.

So, it sounds like you could consider:
 
(1)refinancing from the FHA loan unless you can document any of the above scenarios
(2) obtain a construction-to-perm loan and go conventional
(3) find a builder who is more financially stable to carry the note until you can close to avoid potential restrictions on option (2).

  • April 18 2013
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Profile picture for Marcy OMalley
Contact a local lender to see what your options are.
  • April 16 2013
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To my knowledge you can not have two government backed loans. You could refinance with a conventional loan or if your current loan is assumable you could sell it that way, ( basically it is a buyer taking over your current loan) . I deal with alot of USDA loans. If you are native American with a cdib carrd you could do a HUD 184 Loan. If you would like to talk about it feel free to call me at 405-863-6941

  • April 16 2013
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