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Friday, June 20, 2008

Lenders On Vacation

Okay, I wish that I could say that I'm on vacation here, but I'm not. Actually our lenders are.

Well . . . I don't know if they are here, but they are somewhere.

Here is some a little recap of how we ended up using 3 different banks for getting a loan to finance our farm. (You may need to remove all distractions if you want to follow it all.)

Bank 1 (in Kentucky) - The only bank I could find that would lend us money on a 30 year fixed rate for 40 acres of land. (Almost all of the other options were balloon rates - bad!, and there were a few 15 year terms - too high of payments.) This bank gives this loan under the assumption that a permanent residence will be constructed somewhere on the property. They didn't consider a pole building a permanent residence, however, so they would lend us the money for the land but not the building. We almost didn't get this loan (she was just about to hang up with a sorry), but I mentioned that we planned to build a stick house on the property sometime in the future. Bingo! We qualified for the loan again. So the land was taken care of . . . now for the building.

Bank 2 (our town) - This lender obviously wouldn't finance the land, but considered a pole building house a suitable residence. They were also one of the few banks that would allow us to be our general contractor. One catch. They don't do construction loans - just home loans.

Bank 3 (Des Moines, IA) - This lender works with our home loan lender to finance the construction phase.

So here is how it works. We closed on our land loan in April. (bank 1) We then started the home loan process with the lender in our town. (bank 2) They will have the land loan lender (bank 1) release them land for the home loan for legal purposes. (In case they have to repossess the house - so the lender who owns the house also owns the land under it.) The land released, however, can't include our planned building spot for a stick house since the land lender (bank 1) requires that a house is planned to be built on the land they are lending money for. (Even if it is 15 years down the road.) Now, in order to close the house loan (bank 2), the construction lender (bank 3) has to finance the construction loan. When construction is completed, the house lender (bank 2) will pay off the construction lender (bank 3). We will then be left with 1 land loan (bank 1) and 1 house loan (bank 2) to pay off.

Sound confusing? It is! I think it took me at least a month to find banks and piece it all together. I had no clue what I was doing, and right when we were about to give up and say it couldn't be financed, an idea popped into my mind and we could keep going. (Like when the land loan person was seconds from turning us down.) God is good!

So why is this a post on vacations? Well, lenders take a lot of them I figured out. Our home loan lender (bank 2) has had 3 week long vacations since March. Last week I called her to check on things and her assistant was on vacation. She couldn't help me because her assistant dealt with the land release. This week I called back, and the lender (still bank 2) was on vacation. Thankfully, her assistant was there and was able to carry things through and answer questions. One problem though. This week the land lender (bank 1) was also on vacation, so they couldn't finish the land release. So the loan didn't close this week. Hopefully it will next week when Bank 1 and Bank 2's lenders are all back from vacation. Although, Bank 3's lender has to be around too in order to finalize it all. I'm hoping that her vacation for the month is done!

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1 comment:

michelle said...

Hi Becca, I found your blog recently, and really enjoy it, I'm in similar stages of putting a farm together. I had a lot of challenges with banks and building permits too. My banker worked such short hours compared to me, I always had a hard time reaching her during her "business hours" of like 10am to 3pm-gosh, such a life!

Hang in there, it does all come together, little by little, persistence and patience are the keys! It sounds like you've got that down though!

One time, when I got discouraged, I made a list of all the obstacles I'd run into, and then a 2nd list of all the kind people who went out of their way to help me. I was amazed to realize that the latter was a much bigger list! Good luck, I'll be following your progress!

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