Are any legitimate lenders still offering no doc or low doc construction loans?

Asked by Alella, 29732 Sat Apr 17, 2010

I have an excellent credit score and history, but am self-employed with much of my income from international sources, so a no doc or low doc loan would seem to be the way to go. I am looking to build an owner-occupied home on a lot which I own free and clear, but would like to finance about 50% of the value of the completed project. I am in an area where home values have held relatively steady, and the neighborhood is very stable (this will be the final lot to build in a rather exclusive development).

A few years ago, this could have been done with no questions asked, but I know that many lenders have recently pulled their no doc and stated income programs entirely. Are there any lenders out there still willing to make this type of loan? And am I better off starting with local small banks - with whom I have a long-standing relationship - or with one of the brokers of national scope specialized in such transactions?

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Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Sat Apr 17, 2010
Construction loans in general have almost dried up, and the only place to find them is through local banks as they are portfolio lenders, meaning they hold their own loans. This is the same case with any low doc loans. I don't know if anyone does no doc any more. There was one bank that did, but have removed any of that wording from their latest rate sheets, but these were not construction loans anyway. You will have to show assets I am sure, and the banks that do these loans are more concerned with assets and reserves than ever before.
When you say 50% of the value, are you planning to put no money of your own into the deal, other than your equity in the land? I am assuming you are saying you want 50% of the as-completed value.
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Gerard Dunn, Agent, Chevy Chase, MD
Sat Apr 17, 2010
There are still lenders willing to do this type of loan - but they are few and far between.

You hit upon a good point - stay local - and go with who you know. Where do you do your local banking? Often these banks already know you and your accounts. They may keep a loan as a portfolio to accommodate you or keep your business.

Second option is to advertise in the paper. A 50% LTV is a very secure position. An investor that is getting 1.5% in the bank may be willing to take a little risk to get a 5-6% return.

Talk to friends. They know you and your character. They may be willing to lend you the money as well.

Good luck!

Gerard Dunn
Associate Broker
Serving Maryland, DC and Northern Virginia
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Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Sat Apr 17, 2010
Hi, Alella

That type of financing is a thing of the past. Like most hybrid programs of its time that had and should of been geared towards specific situations and borrowers, it had ultimately been taken out of contexts and abused by lenders and buyers too unethical or naive to utilize it properly. Now, despite your credit score, you're required show and prove your financial ability to repay. A wise decision.
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