Show me the Money!
We’re in a bit of a holding pattern right now - waiting on financing. I’ve been working with two different mortgage brokers. One broker is what I would call a traditional broker. He’s looking to finance our project much in the same way you would if you were creating an addition to your home.
The other broker is taking more of a commercial approach. He’s pitching the project to banks, with the idea that the ADU is actually more of an “investment property” capable of generating separate rental income.
Basically, I’m hedging my bets here. My hope is that one or both methods will work, and we’ll be able to obtain financing.
Commence finger crossing.
Also, for those who might be interested in the process, applying for a loan of this sort is a bit of a paper chase. Here are just a few of the documents I’ve had to produce:
- Personal taxes for both myself and Raina for the last three years (2005-2007)
- W2s from the last 3 years
- Corporate K-1s from Kinesis
- Pay stubs for the last 2 months
- Corporate taxes for my business, Kinesis
- Raina’s work history for the last two years, including phone numbers and W2s. Since I’ve worked at Kinesis the entire time,that part was easy for me
- Bank documentation for all of our accounts. Statements from the last 2 months.
- Profit and Loss Statements from my business
- Other income documentation (401k, savings, etc)
Keep in mind that for many folks, there won’t be the “business side” requirement. Still, it takes a long time to put all of this together. Luckily, I’m a decent record-keeper and have managed to digitize nearly all my financial records. If I need to look for another source of financing, or - god forbid - build another house, I’ve got it all in one place.
February 22nd, 2008 at 7:28 pm
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.
Stacey Derbinshire
February 29th, 2008 at 10:53 pm
You have digitized all your financial records? How did you manage this? Lotsa scanning? And how do you keep it secure/backed up?
March 1st, 2008 at 9:24 pm
Stacey - welcome to the party!
Dijon - I’m using a couple of technologies to make this happen. The main piece is a beautiful piece of software is called Truecrypt. It’s free, hard-core encryption software that creates a “virtual” drive space that’s fully encrypted. I use a ridiculously long password, and store all of my financial data in the “drive.” Truecrypt has an insane number of security options, but suffice to say it’s one of the best solutions available.
Getting the records into the computer depends on the record. Some things (like bank records) are already available online as PDFs. Other documents (like past tax records) get scanned. Fortunately, I have a great scanner with a document feeder. It automatically converts the files to PDFs. Easy!
The last piece of the puzzle is a service called “TrustFax.” It’s a secure, online faxing service. You can use this in one of two ways: First, you can have people fax documents to your personal fax number. You then log in through a secure HTTPS connection and retrieve the document as a PDF. Because the connection is encrypted, there is minimal risk of someone intercepting the file (unlike email, which is totally unsecure).
I also use TrustFax to deliver documents - I can upload the files to their server, then either have them faxed to the appropriate bank, or delivered as a PDF. If you upload the files, Trustfax sends the recipient an email with a specific URL where they can retrieve the file. You can password-protect the URL too, ensuring that even if someone were to intercept the email, they wouldn’t be able to retrieve the file. Then what I do is call the bank/broker and tell them “you’ll be receiving an email. When prompted for a password, simply type in…”
The system isn’t perfect, but in terms of managing all this information, it makes it a lot easier. I’m currently working with two brokers, and it’s simplified the process enormously.
One hitch I’ve noticed is that mortgage brokers don’t seem to be the most technical folks in the world. There have been a few hangups, but nothing that can’t be overcome. In a pinch, I simply “fax” the document through TrustFax’s service.