Working with Our Builder

Another significant factor in deciding to work with Tomorrow's Homes (THI) was the determination of the owner, Gib, to help us find a method to finance the build within our limited resources.

Note: For information about our builder, read the blog entry titled Background--Deciding to Build. Their information is near the end of the entry.

One of Gib's suggestions was to finance this build with a reverse mortgage.

A reverse mortgage is certainly not for everyone. But for us, it was a huge benefit. This mortgage option allows Dave and I (or just one of us) to live in the house without any mortgage payments until either one of the following conditions occurs:
- The last surviving spouse dies
- The last surviving spouse moves out for 12 consecutive months--such as to a nursing home (in all likelihood, if you stay in a nursing home that long, you "ain't comin' home")

After one of the above conditions occurs, the house reverts to the estate and the estate becomes responsible for either buying the house or selling the house to satisfy the remaining mortgage (we put 53% down). The longer we live, the more the 53% equity will be diminished; but hopefully, by the time we kick out, the remaining mortgage will still be below market value, which is a good bargain for a buyer. Enough with the finances--let's move on.

Here's the "God-thing" for us about qualifying for a reverse mortgage--it's all in the timing. In order to qualify for a reverse mortgage, we had to own the property for one year, and the youngest borrower must be at least 62 years old. We would own the property for one year on May 14, 2009; and I would turn 62 the following month!

We vacillated among several floorplans over several months and finally found one that seemed to work--a small footprint (square footage), relatively few changes required, it had enough space for the furniture we are keeping, and large enough for our sedentary activities. (See our entry Designing Your Home in this blog [under construction--check back later]).

Our next step was to meet with Gib and discuss our plans. He thought the plan would work for their building style. He then arranged to meet us at our property to verify that the land grade was suitable for the type of house we wanted to build--it was. However, there will be a lot of grading to level the property so that it is suitable for no steps. Gib was willing for THI to take on the task.

The next day, he gave us a quote. We were satisfied that the quote was very reasonable, and we enjoyed getting to know Gib and his wife, LaVonne. After a few days of pondering the bid and discussing the workings of the reverse mortgage with the mortgage broker, we signed a contract to build on May 15, 2009.

And, as you could imagine, that was just the beginning!

Getting a Real Estate Appraisal

In order to obtain a reverse mortgage (well, any construction loan), you must have an appraisal. In order to make a reverse mortgage financially viable for us, we needed to make sure that our new home came in with the highest appraisal possible. If it came in too low, then the amount that was lent to us by HUD would have been too small and we would have had to come up with too much money as a down payment. We could see that our house would probably be too small to get a large enough appraisal, even with all the extras we added (like a spa tub, screened-in patio, 2-car garage, etc.). To get a higher appraisal we realized that we needed to increase the square footage from 1130 SF to approximately 1230 SF. THI worked with us to make this financially viable for us. Now, it was back to the drawing board to figure out the best places in our floorplan to add another 1,000 SF. Revising the plans kept me busy and out of Dave's hair for an entire weekend--he was rejoicing!

With the new floorplan design, we did receive an appraisal that was financially beneficial to us. (See our entry Designing Your Home in this blog [under construction--check back later]).

After obtaining a 911 address, finalizing the floorplan, receiving the appraisal, obtaining Builder's Risk insurance (to protect us against theft of building materials), obtaining a certificate from HUD stating that we have received our training on what it means to take out a reverse mortgage (a 30-minute phone call session and paying a minor fee), and all the other pre-construction tasks we completed, we were ready to obtain the construction loan. (See our blog entry Tasks Before You Can Build for an overview of all the other tasks necessary to get to this point of pre-construction.)

Next step: obtaining a loan for the construction. Note: The construction loan is NOT the reverse mortgage loan. The reverse mortgage loan is the loan that we will secure when the house is complete.

Gib and LaVonne provided many suggestions and helped us to arrange each and every step in finding a suitable construction loan. They were just awesome!

Making Choices

Throughout the process of creating a floorplan design and signing contracts to build with THI, we (mostly me) change our minds like the wind for items to include/exclude in the house, wood choice and color for cabinets, kitchen layout, etc. I give significant kudos to LaVonne for putting up with our many changes. Even when we had determined that we were finished, we seemed to think of one more things that we forgot to consider. The details of creating the perfect floorplan includes such details as where to put electrical outlets, phone jacks, CATV outlets, and which ceiling light will have a single switch location and which ones can be turned on or off at two locations. The details are mind-boggling. LaVonne has the patience of Job and she never makes us feel that we have driven her "nuts"--as I am sure that we have. Her patience confirms that we have chosen the perfect builder for us.

Read our blog entry Designing Your Home [under construction--check back later] in this blog to understand the processes we went through (months of work) to create the floorplan that works best for the next phase of our lives!