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IndyMac & front-loading the loan


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By Ed in Miami Twp., OH on 7/30/2006


Hello all, I'm new here.  We are in the planning phase and we are half way through the loan process with Indymac.  I've read where others have "front loaded" the loan, what exactly is that and how do you do it?  I understand the Indymac loan is a reimbursement loan but we need some cash upfront because our large addition is going to be in the same location as our existing septic system.  We have to upgrade the septic system before we can do anything with the addition.  Any thoughts or ideas?


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By Scott in Wanatah, IN on 7/30/2006


Providing your septic system upgrade was in your line item breakdown when you applied for the loan, you will be able to get your draws quickley.  Indymac has never asked for a receipt from us for any of our draws.  Hope that helps.

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By Michael in Cave Creek, AZ on 7/30/2006


To front load a loan so that you have some reserves later in the game, get several quotes on the early line items in your budget. Septic, excavation and footing work would be good examples. Then use the highest reasonable estimates, you can for your line item budget.  This should give you a little cash to work with. When building you will encounter challenges and issues, having cash on hand to solve these things will make things go more quickly.
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By Barbara in Wilton, NH on 1/26/2007


Hello,

I am about to go with Indy Mac for my construction to permanent loan (seeing they threw in a 3 year prepayment penalty on my lot loan at the last minute) and was wondering how they have worked out for you so far.  

They wanted to just state that our income was $3,000 more than it actually was in order to get us a higher loan amount, how the heck could that be a good thing??? 

I am just very skeptical seeing I know next to nothing about construction loans.

Just looking for some assurance that Indy Mac is a good bet!

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By Scott in Wanatah, IN on 1/26/2007


Barbara:

Be sure to ask lots of questions.  When we were going through our construction loan process, I felt very rushed and realized that is was approaching the end of the month.  They were trying to get my loan through to keep their quota up.  They seem to be notorious for this.  I ended up putting a halt to the whole thing then one of their people called me and made an appointment for my closing without first talking to me.  I stopped everything right there on the spot untill I felt confortable again.

Remember they are banks and people.  There are bad eggs in every basket.  I often talked to my loan officer's manager to get a confusion out of the way.  If it doesn't smell right, take a minute to look at everything again.

We ended up with Indymac for our construction loan and so far it's been fine.  Good luck.


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By Michele in Stafford, VA on 1/27/2007


Hi Barbara,

  I went with IndyMac also.  The loan officer asked me if I would be willing to sign up to a pre-payment penalty and I flat out told them NO, and that it sounded fishy to me and that we could drop the whole thing if that was going to be a condition. At the time I was a nervous wreck and paranoid because like you, it was the first time I ever applied for this type of loan, so I probably immediately jumped down his throat over it all.

  I talked to some friends in the mortgage business about this and I have to be fair and give both sides of the story. Apparently construction loans are tricky and high risk, and many of the brokers go to IndyMac first because they supposedly have a better track record of getting loans through for them. My understanding is that IndyMac really wants your loan (competition is tough and home buying is way down) and wants to do everything they can to get you approved. In my case, my debt to income looked very high to their underwriter, because they did not read my "fine print" that stated one of my loans would be paid off in 11 months, before I flip over to regular mortgage. So, the loan officer was trying to negotiate a lower than normal interest rate during construction to pass me through underwriting a little easier, and I am told that when they do that, they want you to sign up to at least three years.

   I never did sign up to the three years, because I do not want to be tied down to any bank if another deal comes along. And, they ended up figuring out that my debt was not that bad.

   If you are not comfortable with something, make sure you tell them! My loan officer seemed to me (only ever talked to him on the phone) to be a real go getter, fresh out of banker's college. Sometimes these people forget that the rest of us who don't do this for a living don't understand all these mortgage terms and "how things work." Make them slow down and discuss it with you, and tell them you are not going any further until you understand everything. Plus I hired a lawyer here in my home town to do the closing and explain everything, since IndyMac is in California and Texas.

  I do have to say that since the loan closed I have had no issues with IndyMac.  Their draw process is really good. Nice website, easy to track everything. Their draw people have always answered the phone and explained everything to me and so far I have gotten my draws when they said I would. I'll let everyone on this site know if things were to change as I progress through this. 

Michele


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By Lori in Reno, NV on 1/28/2007


Ed,

Hi I know you are probably done, but I want to answer this question for future readers.

Front loading is when you put larger amounts in the line items that will be done first during construction. For example, excavation, foundation, well, or septic. If the bid for your septic is $3,000 you put $6,000 for that line item and the actual cost is $3,200 you have $2,800 dollars to be used some where else when you choose.

The reasoning behind this is it clears up money early in the building phase that can then be moved at your request to be use on another job when needed. I wish my husband and I had know about this before we did our loan it would have helped when we went over budget on some of the earlier jobs which forced us to pull funds from our reserve.

Hope this helps future readers.

Lori


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By Tom in Stroudsburg, PA on 1/29/2007


Just one addendum to Lori's comments. IndyMac does not require you to leave the $2,800. to be used later. If the line item is complete you can request a draw for the full $6,000., thus making $2800. available immediately to use on other items that may require some cash upfront.
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By Barbara in Wilton, NH on 1/30/2007


Thanks for the advice, I called them back yesterday and slowed him down and made him explain exactly where we were at in the process and made it clear that I dd not want to be qualified for any more than our incomes would allow.  He was much easier to deal with after that and explained exactly what he needs from me in order to move forward and present me with the different options that we qualify for.  Now I'm trying to firm up the budget : )

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