It took three months to get our HELOC (Home Equity Line of Credit) for building the addition to our house, otherwise known as an Accessory Dwelling Unit (ADU – see my last post). The whole process was a roller coaster. Without the thrills – that is, until the last day when the miracle happened.
The first step: go to the bank and begin the application process. Answer the following questions: What is your home’s current value? What is your mortgage’s outstanding balance? How much do you have left to pay on the mortgage? What is your credit score? What is your current loan to value ratio? (I.e. what are your outstanding debts?)
Once all that is determined, the bank will tell you how much you might be able to borrow. It turned out that we’d be able to borrow what we needed to build the addition. Great!
Not so fast. A number – a large number – of documents must be uploaded to the bank, beginning with our last two years of tax returns. We were assigned someone who would go through all this with us – I’ll call him Simon. Fortunately he was a very pleasant person. We emailed Simon documents and he uploaded them to his higher ups, the people who would make the final decision: the underwriters. Those invisible people who determine your fate.
Then Simon contacted us. Originally the value of our house had been calculated by a quick check on Zillow. At the time we’d protested that the Zillow value was low. Now the bank wanted to do a “drive by” appraisal. Okay, drive by. But please let us know when. Definitely, Simon said.
One day, without warning, a strange car came up our driveway and stopped. The drive by inspector? Buzz went out and stopped him just as he was beginning to drive away. He had taken a few pictures. That was it. Would we get a fair estimation?
Time passed. Then came an email from Simon. The bank had decided to do a “walk through appraisal” to determine the value of our home. Fine with us. Some days later a young man called to say he was coming over. We walked him through the house as he noted everything: all Andersen windows, wide pine flooring, cathedral ceilings, skylights, etc. etc. etc.
Time passed. Simon called. The bank was now valuing our house $200,000 higher than previously thought. Hooray! Our loan should be imminent now.
Except more documents were needed. Finally we received a call not from Simon but from a new person – I’ll call her Allison – who congratulated us that we’d been approved for a loan. Wonderful! However (a big “however), it was $70,000 less than originally expected. What?! Why was that, especially since our appraisal had come in much higher?
Well, said Allison, it seems that the original underwriter had made a mistake. “Plus the fact that your property taxes have gone up.” Not true, we said. Allison sighed. “Would you like to speak with the underwriter in person?” Absolutely.
After some time the underwriter was obtained on the line for a conversation. “Oh no,” said the underwriter. “It’s not your property taxes.” Instead, it was because of X, Y and Z. Well, we said, this simply wouldn’t be enough for what we wanted to build. The underwriter thought for a moment and then proposed that if we did A, B, and C, she could add $20,000 to the loan. “Is that the best you can do?” we asked, as if we were making a deal on eBay. “Yes,” we said. Okay, if that’s all we can get, we’ll take it.
Another week went by. More documents were needed for A, B, and C. Finally Allison called to congratulate us that we now had a loan that was $20,000 higher than she had originally told us. By now we were resigned. Fine. “It’ll just take another week while the underwriters go over everything again.”
Oh great. Maybe they’ll find another error. Maybe they’ll reduce the loan again. We waited. And waited. And contacted Simon. What’s happening? He was apologetic. He didn’t know the reason for the holdup.
We decided to write a letter to the bank, explaining all the ups and downs of what had happened, and gave a copy to Simon to give to the people upstairs. He did. We waited. And waited. Everything was on hold. Would we ever build this ADU?
Then the phone rang and I answered. It was the bank – not Simon and not Allison, but a new person (I’ll call her Shirley), who said our bank loan was finally approved and stated the amount. An incredible amount. “Is that satisfactory?” she asked.
“Could you repeat that number again?” I asked. As she did, Buzz walked into the room. Both of us looked at each other in wonder and amazement – the amount she quoted was $70,000 higher, just slightly short of what we had hoped to get originally. What had happened? Buzz asked her to repeat the number yet again. She did. We were stunned. “Do you want to go ahead with this?” Shirley asked.
Trying to quell our excitement, we happily agreed. How soon could this be finalized? Shirley said she could send a notary to our house to sign all the papers. “Would 8 a.m. tomorrow be good?”
Absolutely – the sooner the better!
The next morning the notary arrived, we signed the papers, and the deal was done. We now had the money to begin building. And the bank couldn’t back out. It was official.
Ironic postscript: later in the day Buzz and I walked down to the mailbox. Inside was an official letter from the bank, via Allison, congratulating us on obtaining our loan. It wasn’t for the amount we had just signed off on, but the previous, lower one. What had happened? Why the sudden switch to a higher number?
We’ll never know. All we know is that we have what we need to build. Somehow, some way, a higher underwriter had intervened.