Day 51

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.

Day 50

Another appraisal. Another value. In another post, I told you about the very low appraisal we got a few weeks ago. Well, we decided to bail on the bank that we were using, and that was dropping the ball in more ways than one. I ran into person after person there that would just not return my calls, or didn’t seem to be in a hurry to do anything. Even after resubmitting information to the appraiser we had through that bank, he would not change his valuation of the property and house.

My realtor mentioned that they had a client that recently had a deal done with another bank that went very smoothly. I found out who did it and decided to give them a call. By the end of the day, I had applied online and the mortgage person had printed off my application by that night. A morning or so later, she had already gotten an appraisal ordered. The appraiser called me by 10:00 that next morning.

So, we sat on pins and needles for the next half a day. I was expecting a few day process, because of how things had gone at the other bank. Not the case here. We knew the next morning that we got the value we needed!

We were going to be able to build and have the equity necessary to prevent carrying PMI (Private Mortgage Insurance). On a house the size of ours, PMI could be as much as $250/mo. I really did not want to have that kind of a fee added to our house note if possible. And with this latest appraisal, it looks like we won’t have to have PMI.

So, I am glad I switched over and went with this other financial institution. The only bad things about this part of the process: we wasted about 5 weeks of time with this other institution, and we now had to pay for the first appraisal. A sum of $425!

Overall, I am very happy with how the appraisal came out. Now, on to the next step.

Until next time…

Day 36

Daily resolutions. It seems that daily, I am gathering new data. I am gathering a whole new set of information, prices, locations and people to use each day. What does that mean for us? It feels like we never get a win. It feels like we never really make forward progress, because each day, it seems that the information changes.

One day, it might be that we find out we cannot pay as much for the land as we previously thought. Because of that, we make all kinds of corrections in our search. I will then call my realtor, she will find us some viable spots, I will recalculate the cost of everything and try to see if it will fit. If it will, then we proceed with that land. If there is something wrong with the land that bumps us back out of the price range we need to be, we start the whole process over again. And that seems to happen daily recently.

The newest builder that I’m talking to (He’s not new to building, just to me) and that I posted photos in a previous post of a house he built, met me at some other land during lunch yesterday. We looked over a couple of lots that were for sale, to get his overall opinion on building there. One of them, the larger one, was my preference. He estimated that there would be about $5,000 extra worth of dirt work on that one. The other one, the smaller lot, was exactly what he had budgeted for in his cost estimate he gave me, $10,000. He even had two different dirt work guys meet him out there today to verify his initial estimates, and they did. They said that he was right on with his estimates.

So, we have more daily resolutions to make. Now, with all of the new information on these lots such as location, overall price, what they will “actually” sell for, not just at what price they are listed, we must make as best a decision as possible. We must take what we already know, what we have learned in the last day or so, and try to come to a conclusion about where to build, and what amenities to use. That sounds simpler than it is.

In my mind, if we can, at the end of the day, compile all of this data and come to a solid conclusion of where to build that fits in our budget, then we will put in an offer. So far, that has not happened yet. Today’s resolutions gave us a whole new set of information, with the verification of the dirt work costs. Now, it is pretty much just up to the land.

Before we put an offer on either of these lots (Right now, it is looking like the smaller one fits the budget best, however sad that makes me. Remember? I was the one that wanted more land? I think Rebecca is just fine with this amount, and I probably should be also.), I have to see a plat of the area. They were not marked that well with signs. In many places, you will see “Lot Number such and such” on a wooden sign on a tree or something like that. Those are nowhere to be found here, so some of it is guesswork, based on the address or description. Also, they all only have 1 photo online, so it is difficult to match raw land to a photo of raw land. I want to make sure that when we put an offer on one, it is ACTUALLY the lot that I’m thinking. Over-communication in some of these areas is truly key. When you think you have communicated enough to be clear, go over it again with all involved. There is no need having a surprise in the end.

Until next time…