I approve of this. More like, we got approved! We found out a couple of days ago that we were officially approved for our construction loan. I always knew that we would get it done, but for a few weeks there, it seemed like it would never become a reality. It took a while because we waited through multiple appraisals to make sure to get the value we needed, as I wrote here and here.
Consequently, I wrote the largest check I’ve ever written today. It was from one institution to another, to setup our construction checking account. Here’s how the process will work for us. We establish this construction checking account, from which all of the funds for the building will flow. That way, there is a paper trail for everything, and we can keep it straight being separate from our main checking account.
Then, we deposit our down payment into this account. Thus, why I wrote a check to put in that account today on my lunch break. Even though I KNEW we had the funds to cover that check, I had to log on to the app and check again. I guess it just made me feel better, going through those motions. ha.
Since we are doing our land loan and construction loan all in one, there are a few things that will happen. The bank will use our money (down payment) first out of the checking account. The construction loan amount will act pretty much like a line of credit. Therefore, the difference between the money we put down and the cost of the land will be drawn from the line of credit and put toward the land. This will pay off the land, and it will be titled in our names, but held by the bank as collateral. You see, the bank will not spend any of their money until we first spend all that we have invested. This sounds kind of stingy at first, but if you think about it, it is really in their best interest to do this. It protect them and makes sure that you have some “skin in the game” before they invest theirs. They are taking significantly more risk than we (the consumers) are. Later on, as the project reaches different levels of completion, the bank will deposit those funds into this checking account so that we can pay the builder and his sub-contractors.
The first draw, this is what they call it when you pull money off of the construction loan, will be for the remainder of the money to pay of the land loan. Once that is taken care of, we can break ground and proceed with the building. I really hope some great weather holds out for the next few weeks. I would really like for them to be able to get some concrete poured before the very rainy season sets in.
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We have still not gotten our house plans back from the first appraiser. He took a set so that he could look over them and give an accurate assessment of the soon-to-be built house. What he did was ANYTHING but accurate. Anyway, I have been talking to the other financial institution to get those back from him because one set costs $25. I would kind of not like to start out the project having to go order more plans at $25 a piece. That might be a bad omen. Anyway, we are going on two weeks now, and I still don’t have them in hand. I will just follow up with them again next week to see where we are with this.
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When we found out that we were approved this past Tuesday, we originally thought we would be able to close on the land this coming Friday. However, because of some government regulations, RESPA, and how they have to disclose things, the earliest we could close would be next Tuesday. That being the day after a bank holiday, Veterans’ Day, we just decided to push it another couple of days to Thursday. That way, if anything else comes up, we can still handle it and close on time. It is a good thing that we got the extension for 2 weeks on the land contract. I had hoped that we would be closing this week and be ahead of that schedule, but as it appears, we will only close one day ahead of that contract’s deadline. That is just a little too close for comfort.
Our builder is sitting on go. He is completely ready to get going, and so are we.
Until next time…
NOTES ABOUT PHOTO: This was last weekend. I cannot wait to see my family playing in my own yard again. They are going to love it and we are going to love watching them and playing with them. This is my beautiful daughter that is 18 months old, and my beautiful wife, Rebecca.
Dirt To Done 