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How do i get my VA mortgage to be processed

I applied for a VA Mortgage through Loan Depot on my home that I own free and clear. I had a $200,000.00 line of credit at my disposal. I am doing major construction on the house. As part of the process,LoanDepot told me to close the equity line> I had a closing on the mortgage on Aug. 15. About 10 days later LoanDepot informed me that the VA would not do the loan because there was no money owed on the property. They suggested that my contractor put a small mechanics lien on the property. The VA would then process the loan, pay off the lien and everything would be fine. I was going to do that, but don't feel comfortable. What do you suggest? i need the loan, but don't want more problems.

1 reply

Sep 23, 2019

Generally, it's not a good idea for an owner to intentionally have a mechanics lien filed against them. And, doing so in order to secure lending for a home construction project might not be the most efficient way to secure funding. And, as you'd mentioned above, it could create more problems. When a mechanics lien is filed, it puts the property owner's title in jeopardy. This is different than a normal line of credit taken out of a property for a few reasons. For one, it's an involuntary security interest. Meaning, unlike a mortgage, the owner of the property won't really have control over a mechanics lien. With a mortgage, the effect on the title is more or less negotiated. So, the owner and lender can agree to specific terms and then, as long as those terms are followed, the owner typically has nothing to worry about. Quite the contrary - mechanics liens have very strict deadlines, and they aren't contemplated as a solution to lending problems. Once a Virginia mechanics lien is filed, the contractor who filed the lien must enforce (file a lawsuit) on their lien within either 6 months of filing the lien, or within 60 days of the completion or termination of the project (whichever occurs first), or their lien will expire. So, if a lien is filed and if payment - for some reason - isn't actually made to the contractor who filed the lien, then the owner could find themselves in a full-blown legal dispute. Not to mention, even if payment is actually made - the lienholder obtains quite a bit of leverage once they've got a mechanics lien - and sometimes a lienholder will wield that improperly. Plus, a lien could have lasting negative effects on a property owner (including, potentially, against their credit score). Ultimately - utilizing mechanics liens for something outside of their intended purpose is just typically not a good idea. Mechanics liens aren't a replacement for or a compliment to other lending options. Rather, they're a very powerful payment recovery tool for contractors and they can have lasting negative effects against the property and property owner. I hope this was helpful! For more insight on construction loan options, here are a few online resources that might help provide clarity or other options: (1) How to Get a Home Construction Loan (2) Loan options abound for remodeling projects (3) Home Improvement Loan Options (4) These mortgages and loans pay for home renovations

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