Lending Woes

One of the most difficult parts of this process has been to secure financing. In a time when mortgages are harder to get, securing a construction loan has seemed next to impossible. Add to that the fact that I am a freelancer, and, well, you get the picture.

After being not so much turned down but turned away from several banks that were no longer even offering construction loans, we finally found one that would give us what we were looking for: money to both buy a lot and build on it. Diane Martin of Wells Fargo in Bellingham talked us through the loan application process. Not only did we have to turn in the usual tax returns and W2s, but the underwriters wanted signed letters from our parents documenting that the Christmas gift checks they’d given us were in fact gifts and not loans.

It was all very complicated and labor-intensive, but we turned in everything they asked for. We thought we were in the clear when we got a letter saying we were conditionally approved, but then a couple of days ago, we got a terse email from someone in the Seattle branch saying that they could only offer us 70% financing. When we applied for the loan, Diane told us we would have to put 25% down, and that is what we had budgeted for. A 5% difference seems pretty small, but when you’re talking about the entire cost of the project, it’s quite significant.

What to do now? That’s the question that has been making us worry and making me hop out of bed late last night to add up the numbers just one more time. We already have quite a bit invested in plans, engineering, not to mention $10,000 in escrow and all countless hours of our own time invested. Walking away is not an option.

I called the Seattle Wells Fargo rep, who’s working on the construction part of our loan (as opposed to the permanent post-construction part) today, and she told me that the increase in down payments is due to the real estate market softening in our area. Apparently the number of foreclosures around here is making the bank nervous. Diane in Bellingham says she’s working on some “options” for us, but going back to a 25% down payment doesn’t look too likely at this point.

We could probably scrape together the 30%, but that would leave us with almost nothing to start the project with, a scary and probably unwise way to begin. I’m hoping we don’t have to make the tough choice to eliminate some energy-saving feature of the house–like the solar panels–but it may come down to that. We’d have to change the name of the blog.

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