under construction
IN POLITE SOCIETY,
YOU DO NOT TALK ABOUT MONEY
Well, that ends now….you are dealing with the banks……drop your drawers…
They want to see EVERYTING…and they will!
To get a feeling if you are even likely to get a construction loan, you can, and should be absolutely honest with the banks.
You will tell this stranger behind the desk, exactly how much money you have, will have, your income, you work history your debts & credit scores.
You will tell this stranger stuff you never tell your best friend or mother… you just drop’em like in a Doctor’s office, but without a paper robe.
At this point in your 2 years of planning drawing, thinking, you will have “construction ready”
(picture here)
drawings AND the official signed off bid from your contractor…. the bid that you and he/she agree on the price and scope of the job… down to the last details…
You are solidly 2 years into the process now, and ready to see the banks….
there will be 3 people in this unholy alliance now.
- You,
- the contractor and
- the banks.
Banks are Fearful people
Banks work out of fear…
Fear you are broke,
fear you are running a scam on them,
Fear you are lying,
Fear you are a drug lord laundering money,
Fear you are not employed,
Fear you are employed…
They ask for 20 documents, and you slam back PDF’s so fast!
Taxes, income, banks, IRA, all fresh, with page numbers on the bottom, “no screen shots please”… and still they ask for more and more.
If the process lasts more than a month or two, they ask for “FRESH” bank statements, pay stubs, again…
At all times,
You are the criminal,
They are the cops…
You feel dirty, illegal, a suspect the whole time…
(So as you prepare to build… clean up your your financial life, have good credit, steady job, pay off small odd credit cards…)
IT ALL BEGINS …WITH A BEAUTIFUL/HANDSOME SMOOTH, CULTURED PERSON AT THE INTAKE DESK…
They hook you into their bank… all will be well.
You think this is your guy/gal…
I can relate with this one… it will all be OK.
But after he/she signs up up…. you are handed over to some guy in the back room, who you never see,
an anonymous clerk in a cubicle,
…just a name and an email and a phone…
and they become your nemesis….for the next few months…months!!!!
THE UNDERWRITER
Everything gets blamed on the UNDERWRITER
…. some anonymous fact checker, that presumes you are a lying crook the whole time….and works up from there.
Banks just say…1000 times…..”well, its up to the underwriter…..”
you never EVER speak/deal/email to an underwriter directly, always 2 degrees of separation from you, and the all powerful UNDERWRITER…
He/she will constantly ask for more and more documents …playing good cop, bad cop… “for the “underwriter”.
The underwriter has no name, no contact, just a man behind the curtain that controls everything.
Every demand of you, every rejection, every “need to know” is “for the underwriter.”
It is a sickening, frustrating process, where you jump when they say jump, and you wait, and wait, and wait. …the process is creepy, and one-sided.
And still, I am 100% perfectly legal, and honest, computer savvy, with great credit, great job, building a great house, in a sterling neighborhood… yet, I feel creepy, suspected, and loathsome the whole time.
No more cultured lady at the front desk…you are dealing with a prison guard mentality now…”Honest… I didn’t do it guard… honestly… I never did it! “
I miss the days when your handshake was your word.
That was an honorable time.
Deadlines…
Construction loans have a higher interest rate than primary home mortgage.
There will be an interest rate, during construction.. one or 2 % higher than normal, then the bank offers you a great final interest rate, after you are done…IF you get done in a projected time span.
In the beginning, you say….surely we will be done in 12 months… this hell cannot last longer than that? Unimaginable..
AND yet it will.
You don’t know it, but the bank and the contractors all know it.
They do not care!!!
Really, THEY DO NOT CARE….. so the job takes longer than imaginable… lies, excuses, delays, procrastination, being stood up, waiting, the weather, the holidays… YOU ALWAYS COME LAST….
If you have a locked in interest rate, say…be done in 12 months…or you lose your great interest rate…the clock starts when you sign…make sure your contractor is ready to start too…They might be finishing other houses…and you could loose a couple months, waiting for permits, or demo etc…
The amount the bank will loan you, depends on both your income… AND the appraisal based on your blueprints, and bid. This appraisal is notorious for being 10% lower than the finished house.
Appraisers are fearful …. So, they low ball a house, so they will not be sued. In the 90’s appraisers were the Wild West…so now banks and appraisers are very gun shy…
Banks are fearful, so they low ball the appraiser so they will not be left holding the bag.
You are fearful, because your whole future, depends on whether you get a flaky, creepy appraiser….or a professional, intelligent appraiser… (see my essay on appraisers…).
Finally, after all this cautious paperwork, lasting months and months…the bids, the contractor hunt, the evaluation of your income, you STILL have to secure INSURANCE on the construction job…..!!! More paperwork… more shopping around, more begging…
When the house is finally done…(is is realy EVER done? The bank will send ANOTHER appraiser over…to do a final appraisal…so the bank can release the final money due the contractor….
At this point… you might still have the list of construction flaws, mistakes, jobs not done…the punch list… as it is euphemistically called….
I call it the list of errors, problems, jobs promised, but not done, the clean up, the doors that don’t open or close..the mountains of cement piles in the back yard, the paint sprayed on your bushes, and roof shingles… you know stuff…
The appraiser does his job all over again…. And eventually the contractor is relieved you actually paid 100% of what is promised…
see my essay on DONE… it is like a stack of cards..
the city signes off, giving you a occupancy
the bank pays off the contractor
the punchlist of errors is combed over till you cannot stand the sight of workers in your life anymore
and now, you have a big empty space… to fill up.
It is not like in TV with all the furniture and paintings and candles glowing….
you are left with your storage room to evacuate and pay off…
your lawn to repair, your windows to clean.. and little by little, it becomes your house…not
one day… but over a few months,…!
you never want to see a contractor again… and never want to see a sub..done and done.. you want you life back, your privacy, your own timeline…not theirs..
not like TV..
If the bank screwed you over with a big interest rate….becasue they can… you now start all over, and begin the refi of the finished house again… with another appraiser, and 3 more months of paperwork…
SEE… it is not glamourous…
But 2 or 3 years later…you will be greatful, you did it, and love the hosue you designed so well….pain is forgotten …if you compartmentalize well…
see my experiences…