Reality of the difficulty of getting a loan

It’s pretty obvious to me that the financial banking system is in the process of a major overhaul. Just a year ago it was very simple to get a loan, especially with a credit score over 750. Today we basically had a loan fall through from our bank we do everyday banking with. What happened?

About 2 months ago my wife and I stumbled on some land where we would love to build a future home. It’s a one acre lot in a very nice neighborhood. Right now because of the price we weren’t really in a financial situation where we could comfortably afford a payment on this particular piece of land. We however called the listing realtor just to check into the situation. After talking to the realtor we decided to pass on the land even though the price was a pretty good deal.

We were disappointed but forgot about the land for about two weeks, when the realtor called us back. He informed us that the price had dropped about $10,000 on the property and the land owners were eager to get rid of the land. It was a foreclosed property owned by the bank and they needed to liquidate it for cash ASAP. He suggested we make an offer that we thought we could afford.

We got our hopes up again that we could buy the land and build our dream home. We talked to our bank about financing the lot, but realized we had to have 20% cash to pay down on the land. This was basically a new rule as a result of the current state of the economy. A year ago and we could finance 100% of the loan, but that’s probably why the land was foreclosed on in the first place. Anyway we had to find a way to come up with the money.

After several hours of discussion we both agreed that we didn’t want to drain our savings and crunch our budget so tight with the current state of the economy. I came up with the idea of refinancing our home to get cash out and pay down on the land. Great idea and our bank agreed. We made an offer on the land, it was accepted and the paperwork started. Until a week ago we were ready to buy the land and start planning our dream home. But the breaks were pushed hard when we found out our home didn’t appraise for enough to get the cash out we needed to pay down on the land. We tried several options but none seemed to work for us.

Again, we gave up hope on the land until a friend at work suggested we try a local hometown bank. Long story short it ended up working because this bank allowed a refinance with a 95% LTV instead of a 90% LTV. We are now in the process of doing more paperwork and hopefully closing the loan in less than 3 weeks.

Throughout the whole process I was so frustrated because I’ve never had a problem borrowing money. My wife and I both have excellent credit and never missed a payment, but for some reason we couldn’t find a solution to this loan. Our debt to income is really good but it still didn’t seem to matter. TImes have changed especially in the financial and banking industry. We can only hope things will be fixed soon!