The bank called yesterday, and we received our second appraisal.  This time, the appraisal was in line with our costs to build and so the project is back on track.  We are excited to report that Conway National Bank has worked out great for us with our building project.  Given the appraisal results, we are in good shape to handle the cost of the build and anything that may come up, as well as pay off the small amount we owe on the land.  Right now, the feeling of relief is just settling in and we are just now realizing that the project is going to finally happen.  Jen and I had both mostly given up after a bad appraisal, a second bank turning us away and a third bank deciding that they didn’t like the amount of cash reserves we had (and giving no credit for having zero consumer debt!).

A few things that I have learned along this process:

1. Banks don’t care that you are debt free.  When figuring your credit worthiness for a construction loan or mortgage, they want to see that you are less than x% gross incoming to debt with the loan.  Having no additional debt did not help us…  Because banks allow another 10% of your gross income towards the additional consumer debts.  I found, at least in our case, you are better off saving your money than accelerating your payoffs on consumer debt.
2. Freddy Mac and Fannie May loans for construction are extremely difficult to get unless you have large cash reserves today.  While I think construction is the best way to put people back to work, banks or the government seem not to agree because they have made it nearly impossible for the average American to get one of these loans – unless you can put down 30% of the cost of the home.
3. I had to work with local banks on in-house loans.  Although this means a two-time close, and probably higher closing costs, I was able to find terms that were much more workable to our situation.
4. Appraisals are screwy right now.  This has little to do with who is doing the appraisal, and more to do with the market.   There is no delineation between a foreclosure, short sale and conventional transaction for appraisers.  Its all one big pool and so the foreclosure and short sales have brought everyone down (yes, I know — no duh! — read or watch the news).  But, I have also heard that appraisers are also doing their part and being intentionally conservative with the comps that they use on the appraisal.  I don’t know how true this is, but based on what I have been told and the results of our first appraisal – I find it to be true…
5. There is no replacement for relationships.  Throughout the financing process, the places that have worked best for us were the places where the people knew me, knew my extended family (or friends), and knew my reputation.
6. My credit score didn’t really matter…  Yes, I know this sounds really odd, but CNB didn’t care about my credit score.  They cared about my credit file and looked at each account and how it was managed and handled.  Jen and I both had excellent credit scores, and my past experiences led me to believe that these were good enough.
7. Its a tough time for everyone.  Although Jen and I have been largely insulated from the financial meltdown for the last few years, we were greatly affected by it while shopping for financing.

We are extremely excited to be moving forward.