There are signs of the economy improving everywhere, but I never thought that this could actually help us in building our house.
We started planning this house in the fall of 2010. Our budget was set based on what we knew we could afford for a construction loan because the financing, especially for non-big-developer or unusual construction, is completely different than financing for a traditional home loan. To get a construction loan from a bank, we understood that we had to put down 20% of the requested loan amount in earnest. Two years ago, we were told that our land could not be included in this loan, nor could it serve as collateral to get the loan. We were also told by our loan officer that the bank would appraise our home plans before building, and if the home price went too far over the average price for the area, they wouldn’t give us a loan (especially important when considering building in a transitional area). We took all of this into consideration when beginning this process, and set our construction budget accordingly.
Fast forward two years to a better economy where banks are slightly more willing to give out money. Last week, the same loan officer at the same bank told me (three times, because I asked twice while I was there and then called back just to make sure) that our lot WILL count for some collateral. Because of the equity we’ve put into the lot over the past couple of years, and because of increasing lot values in the area (hooray, transitional neighborhood!), the bank is willing to credit us dollar-for-dollar, and let the land serve as part of the 20% loan down payment. Plus, we’ve learned that the house appraisal that the bank will perform takes all new construction values within a 7-mile range, rather than all existing home values, into account…and there is SO much new construction on our side of town. Both of these things mean that we will likely be able to meet a slightly higher contractor bid without cutting more essentials from our plans.
This just might be the construction miracle I was hoping for! Or, it’s at least enough hope to keep us going as we select a contractor and see what happens next!