Four long years. It’s been over four years since we bought our property out in Volente. We weren’t in a rush at first, but eventually it became something that we were ready to do.
Then we finally split the property. Once the property was split we chose a builder and were ready to move the process forward. Rates were at historic lows and based on the preliminary bids that were coming back, we knew that it was going to make sense to borrow some money.
I shopped around quite a bit to find out what would be the best bank to use for our construction loan. I was amazed how much variation in rates and closing costs there were between different lenders. One bank quoted me over 1.5% higher than what I ended up getting. Some banks had more than $8000 difference in origination charges. I ended up selecting RBFCU because they had both the best rates and no origination charges.
We applied for a loan in June of 2020. Looking back, it’s hard to believe that it’s been five months that we started this process.
I knew that there would be a bit more scrutiny of our loan given the broader economic climate that we live in. Fannie and Freddie have cut back on the loans that they back. Jumbo loans are even harder to come by. However, given how low mortgage rates are, and how much money this country is printing, I feel like it would be a poor financial decision to not take advantage of these historic lows.
I’m proud to say that I have excellent credit. I take my financial responsibilities seriously. I pay my bills on time and always have. I’d like to think that I’m a very low credit risk. I have a good job at one of the most stable companies in the world. So when we submitted all of our plans, proof of income, and assets to the bank, it was not really a huge surprise that we were approved.
The next big step was that we needed to get an appraisal for the future value of the house that we’re planning to build. Before the loan goes to closing, the bank needed to validate that the house that we are going to build would justify the amount of the loan.
When talking to the loan officer, she mentioned that we could save $200 by waiting an additional two weeks. That seemed to be easy money so we said yes.
The appraisal came back on time on the new timetable. And the amount was good. Perhaps too good if we need to pay property taxes on that amount. It was actually so high that we wouldn’t need to bring additional funds to closing since we had already purchased the property outright.
We had also been purchasing items as we’ve found things on sale to save money where we could. The plan was to later reimburse ourselves for those later if needed to help pay for the pool.
We were supposed to close on September 18th.
About a week prior, I started talking to the bank again to make sure that things were on track. It was still with underwriting. Okay.
The closing week comes and still no word. There’s been a record number of refinances, so I just take for granted that they are a little backed up. No big deal.
Finally another week or so later, I call to see what’s up. It’s only then that I come to find out that raising the loan amount is starting to cause problems with underwriting. Apparently since a non-trivial amount of my salary is described as a bonus, they won’t count that amount — even though I have an offer letter describing it as part of my compensation.
So they need more documentation and time.
Eventually they come back and decide that they won’t approve the higher amount. I was (and am still) annoyed, but at least we could finally get started.
On the plus side, they did count all expenses that we had been meticulously tracking so the amount we had to bring to closing was very reasonable. If there was a bit of a downside, this was the most anti-climatic closing we’ve had. Normally when you sign up to borrow money, you get something… a house, a car, something. That obviously is not the case with a construction loan.
But most importantly — WE CAN START BUILDING!
Insight, Perspective, and View into Life 