Loan Lessons

Lesson number two - Construction Loans take a looonngg time to close on.

Lesson number one is - Trust no one. We started the process in August with one bank (Washington Federal). The story changed -to the tune of us having to come up with an additional $30K as well as the type of loan we wanted (5/1 ARM) not even being an option - even though we were told it was and given the Good Faith Estimate (GFE) to show our payments with that loan type. Even though we really liked the loan officer and thought we could trust her b/c she had just built a house herself and we had already spent 6 weeks dealing with her, we had to go elsewhere. At the time banks were crumbling and we had done our homework to get in with a stable bank with good terms. Unfortunately, the terms quoted have to be accurate to be beneficial. Our first clue should have been that Ben had to do the calcualtions for her on many a meeting. Ben would make a great loan officer by the way.

Meanwhile we had already bought the land (at the maybe unethical/maybe not pressuring of the real estate agent who claimed that there were other interested parties) and were paying 8% interest on it. We had hoped to save ourselves some money by having a single closing but the sellers were not going to wait around for the loan process and now I can see why.

So, eight weeks ago, September 25th to be exact, we started working with a CONSTRUCTION LOAN SPECIALIST (this is important) at Chase bank. So even with good credit and all of our ducks in a row (paperwork) the process takes a long time because unlike a traditional loan, first we have to be approved as buyers, then the builder has to be approved, then an appraisal has to happen (on the land and the plans) (our land came in $20K higher than we paid and the project came in $40K higher than we have budgeted - yay! This is good because they will only lend you 80% of the appraised value, which means we have to bring less to the table initially), then the project has to be approved, then underwriting has to approve it.

If it were not for taking a personal loan and using some of our own funds we would still have a fully-treed, albeit very beautiful, lot. Luckily our builder trusted us (and made us sign something saying we were responisible for any fees incurred if we didn't get the loan money) and we went ahead.

Today, we closed on the loan.