Using your money from the bank

Once you finally have funding from the bank, you'll be able to start spending it (and in my case, almost throw up at the site of your beautiful, new home). 

In working with your builder, you'll need to come up with a Line Item Breakdown, which is the document that the bank uses to issue each draw (ie: put the money in your pocket).  Your Line Item Breakdown will show a budget for everything from clearing and excavation  to hardwood flooring.  This is the document that the bank will stick to EACH AND EVERY TIME. 

So let me put it to you this way: Let's say that your subcontractor needs $25k to dig a hole and pour some concrete.  I had stupidly assumed that I could call up my friendly bank rep, have her issue a draw for $25k that was listed on our Line Item Breakdown for "excavation and concrete" and she would sink the money into my account.  Makes sense, right?

What no one had ever told me was that a draw is issued after the work is completed.  The subcontractor does the work, you request money from the bank and the bank issues the money (this is called a "draw") after the work is completed and the bank can physically go out to the job site and verify that the work has been completed. 

With that being said, bear in mind that you might have to float your builder a huge wad of cash for the subcontractors to get started.  While that might drain your savings account, once you get the draw from the bank, you can replenish your savings with that money (Yes, that's entirely kosher, because I called the bank rep to make sure that we could pay ourselves back after shunting all of our savings to the builder to get started.  Again, that also made me want to hurl). 

Another consideration when laying out your budget is this:  Let's say that you only budget $25k for the excavation and concrete and then the bill comes in at a whopping $45k.  Since your Line Item Breakdown only requested $25k, that is all you will get from the bank.  That means that you'll be required to come up with the remaining $20k from God only knows where. 

It's my suggestion, and the suggestion of our builder that you pad up the front of your loan.  Overbudget for initial expenses like excavation, concrete, foundation work, and framing - because any excess that you have from your draws stays in your account, and can be spent on other line items down the road.  You don't want to get hosed and be in the hole right at the very beginning of your project, so be generous and give yourself a big allowance for the first few things in your project.

Now that I've laid out the steps to get started, I'd like to get into the fun part! 

Next up: pictures from the ground up