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Hi,
We own 23 acres of land and we were recently approved for a new construction loan that we will convert to a standard mortgage after we receive our occupancy permit. But we have several questions about this.
The bank increased our interest rate from 5 to 6.5 because the appraiser said there were no comparable properties in the area with 23 acres. We had monies set aside to pay for the well installation, porch and septic system. We were told that we had to put that money into escrow and that the bank would pay the contractors upon completion.
We also found out the bank paid some of our closing costs out of the escrow fund, even though we had rolled our closing costs into our mortgage.
Is this legal?
construction loan problems
Hi Jyll,
I think you need to check out your contract with the bank about the increase in the interest rate. If the contract mentions about any increase in interest rate if comparisons does not work out, the bank can legally increase the rate. Otherwise they are not supposed to do so.
We also found out the bank paid some of our closing costs out of the escrow fund, even though we had rolled our closing costs into our mortgage
I think you should talk to the bank about this. If it is just because of an error they may return you the money.
Thanks,
Aaron