Surviving the construction loan closing like a pro
If you have been following our house building journey for any amount of time… you might be wondering if we will ever actually build a house or if we just like talking about building a house! It may not seem like we know how to be closers. You may have already heard this news through our Facebook page or on Instagram but if not….friends, we are VERY excited to announce that SOMETHING FINALLY HAPPENED! We closed on our construction loan!
“Please, give us your money!” We said to the bank. “We really want to build a house.”
“Wait.” The bank replied.
… and then we did for 6 months… plus one more (for good measure) as we waited for the appraisal.
Click here to read more about How Long Does It Take To Build a House
Click here to learn how to avoid disaster in our post about New Construction Appraisals
Then, one day we looked at our budget and we tentatively decided that we had saved up enough to approach the bank once again and give this house building thing another go. But did we automatically go with the same bank we did before? No way!
Allow Banks to Compete for Your Business
The first thing we did was scour the internet for banks in our area that provide construction loans, then we called each of them and presented them with this list of questions:
- What are your current interest rates for new construction loans?
- Can you tell me what kind of construction loan products do you offer (30 year fixed, 10 year arm etc).
- What is your minimum required percentage for down payment on new construction loans?
- Could you give me an idea of what your average closing costs are like?
- Do you have draw fees, and if so how much per draw? Would we pay this at the time of the draw or at the end of construction?
- Is your bank flexible with their draw schedule or do draws need to adhere to a strict schedule?
- In your recent experience, have new construction appraisals come back at the cost to build, or have there been issues with this lately?
- Is my contractor on your approved contractor list? If not, how long would it take for him to get approved if we chose your bank for our loan?
In general, we were looking for the bank who could offer us the lowest interest rate, draw fees, closing costs and who sounded pretty confident in how appraisals were coming in. We also wanted a bank who would be flexible with their draw schedule and also already had our contractor as approved on their list.
The person who will be able to answer all of these questions is the bank’s construction loan officer. We had to play a little phone tag with some banks to finally get in touch with them, but this research cost us nothing and we were able to get all this information with phone calls. No appointments needed!
Oddly enough, the bank we went with the first time ended up being the one who checked off all the boxes for us the second time! We were surprised but it was really nice to not have to start completely over again. Who knows how much more time would have been added to our timeline!
Get All Paid Up
Even though we got pre approved and our credit checked before our closing date, the bank STILL checked our credit again before they signed on the dotted line…
we found this out because of an embarrassing (and not our fault) mistake with our land taxes. In short, due to a mix up in the mail our land taxes arrived late. The late fee was a small amount ($16) and since our second half of land taxes were due next month I had just decided to pay the $16 with the next tax check… well the bank noticed. I nervously explained it all and they nodded and seemed to move past it… but I recommend avoiding this stress all together and just make sure everything is paid in full and on time before you walk in and say “Please loan me all the monies.”
Get it together
Easier said than done… #amiright?? No, but really there are a few things we were told to bring and a few things we had to make sure were unexpired before we officially closed on our loan.
- Driver’s license of each person listed on the construction loan
- Social Security numbers of all people listed on the construction loan
- A copy of the signed contract with your builder
- Draw schedule with your builder
- Each person listed on the loan should be present to sign at closing. The builder can also be present (as they will also need to sign the loan contract) but because our bank works with our builder often, they stated he would come by the bank later to sign.
- A very large cashiers check with all of your money on it. 🙂
Click here for how we saved $22,000 in 6 months in our post: Little Money Big Dreams
Congrats! You’re a Closer!
After having waited a very long time (about one and a half years… we have been dying. LOL.) What might seem like a very mundane subject to many, feels like a major victory and a tremendous relief to us.
Until this point, when we told people we were building a house it was really all very imaginary. Now, although we feel much poorer it really does feel like something real has happened. We are finally one big step closer to building a home made uniquely for our family on our dream land.
To read more, visit Buying the Land of Our Dreams… On a Budget
Thank you so much, everyone, who is following along with us on this journey. Hearing your feedback and having a community as we go through this process has really meant the world to us!