Castle Loan Details

So I guess the loan is real, I have the paperwork, signed, sealed, delivered, no backing out now. I guess I can safely talk about it without jinxing anything.

I thought, all along, that I would provide a litany of the banks that said no, but we’d be here all day. Pretty much, you can assume that if the bank exists, at some point they said no to me. I probably spoke with 30 banks all told. Some told me no straight off the bat, they either didn’t do construction loans, or didn’t want to do one this large. Others lead me on for awhile before saying no, some loan officers tried really hard but ultimately could not get the approval.

A few of them said they would loan me the money, but only if I deposited a nearly equal amount with them first. Some said they could do it, but at half the required amount. Many blamed federal regulations making it too hard for them to do it. Many told me the problem was the appraisals, our appraisals were high enough, but they were nonconforming to regulations because our comparables were too old and too far away. It has to be sometime like sales within 90 days within a mile – so good luck if you’re out in the country. There are many places where you’d never find 3 homes that have sold in the last 90 days similar to yours within a mile of yours. Then of course, many simply thought that if I was building a McMansion it would be okay, but they worried that, even with my 50% down payment, they would take a loss on it in the (inconceivable) event of a foreclosure, because, who wants to live in a castle? I mean, yuck, right?

Ultimately I actually used some website, because I thought, what could it hurt? To get “multiple loan offers” blah blah, I’m sure you’ve seen the ads for sites like it. Through this site a mortgage broker out of Florida contacted me. He said he thought he could get me a loan, he worked on commission, 2% of the loan. That is pretty steep, but I didn’t have a lot of options. So I said okay. I was still free to keep looking for banks, but if I went with one he referred I’d owe him 2%. Ultimately, he got me back in with two banks that had told me no before already, Sun Trust and BB&T. Sun Trust sort of dragged their feet and while their initial offer was really nice, it was hard to work with them and they didn’t respond very quickly, and we’re already about 9 months late on starting. BB&T worked steadily through the underwriting and ultimately approved the loan and I went with them. I got a $2 million construction loan that converts to a permanent 30 year mortgage on completion. The rate floats within a range for now, Sun Trust was going to lock a rate in the low 3s which I would have preferred, but like I said, they were taking awhile and their approval was not guaranteed. So now I owe the mortgage broker $40,000.

What? I mean seriously, I want to be angry at him, $40,000 for a phone call and an email? Nice work if you can get it. Just for “selling the sizzle not the steak” as he said. But I can’t be angry at him, all he did was exactly what he said he would do, and I agreed to it, and ultimately without him I would not have this loan. So I can’t be angry at him, and as much as I’m going to dislike writing that check, that is his money. I can be angry at the banking system overall for forcing me to use him. I should be an ideal borrower, wealthy, well employed, large down payment, excellent credit, and our banking system was hard for me to use. No wonder the middle class is still hurting. Our government has this habit of gross overreaction. So we had a banking crisis largely caused by poor regulation, and the solution is more poor regulation swinging the pendulum too far in the other direction. When what we needed was not more regulation, merely smarter regulation. So now, instead of being too easy to get a loan, it is too hard. One option presented to me was to put my home into an LLC and then I could have gotten a commercial loan on it because the regulations were more lax for those so they could get it done.

So BB&T is the winner, but even then it wasn’t a perfect situation. They had to charge a slightly higher interest rate because the loan wasn’t going to be underwritable enough to market it as a security or ever sell it. So BB&T was going to have to keep it in-house no matter what.

So now, I think, I can take the banking stress out of my life, and instead replace it with building stress.