SHOW TRANSCRIPT

 

 

[00:00:05] Speaker 1 All right, so welcome to another episode of the Go With show today, we’re here with Dan Aminoff with Citizens One Mortgage and Dan. You’re a branch manager with Citizens One, so what does that mean?

 

[00:00:17] Speaker 2 So I’m the branch manager of the Falls Church Office for Citizens, one where the home lending division of Citizens Bank, which is based out of Providence, Rhode Island. I’ve been with citizens now for just over three years and we have been growing here in the in the D.C. metro area

 

[00:00:37] Speaker 1 all that time, right? And, you know, just for the folks listening. So there’s obviously a huge Stanley Martin custom home connection. You’re one of our preferred lenders and have done a lot of mortgages for our buyers, you and Mike Zelle over the over the years. So that’s that’s kind of how we know you.

 

[00:00:54] Speaker 2 Exactly. Yeah. You know, Mike. Yeah, luckily retired this past July. He’s joined enjoying the life down in Wilmington. Yes, I miss him. He’s my phone. A friend. Yes.

 

[00:01:07] Speaker 1 So yeah, I’ve listened to. He’s been great to work with. You guys have both been great to work with. So you guys tell us a little bit about, you know, who you are and how did you end up at citizens?

 

[00:01:20] Speaker 2 So I I’m originally from Southern California. I went to school at UC Davis while I was in Davis. My best friend’s father owned a mortgage company. So he immediately hooked us up. Him and all his friends, we were working for his dad’s company, right? So I started in the mortgage industry, believe it or not, when I was 18, and here I am, almost 40 years later, still still in it. Amazing. Over the course of time, I ended up moving back here to Virginia in 1998.

 

[00:01:53] Speaker 1 So what brought you to Virginia?

 

[00:01:54] Speaker 2 So my current

 

[00:01:55] Speaker 1 wife? Funny how that works, exactly.

 

[00:01:59] Speaker 2 So a friend of mine from California had moved here. Yeah. And, you know, knew that I was single and he was working over Freddie Mac and had a friend there who thought she would be perfect for me. Finally coaxed me to come out here, right? Had a blind date. Wow. And the rest was history. Wow. That’s got to be

 

[00:02:20] Speaker 1 some sort of a record, right? So a blind date from the West Coast to the East Coast?

 

[00:02:24] Speaker 2 Exactly. And a year later, I was I was living here and starting my mortgage career on the East Coast. Wow.

 

[00:02:32] Speaker 1 So that was like pre-internet, right?

 

[00:02:34] Speaker 2 It was internet was was around, but not much. I think we

 

[00:02:38] Speaker 1 had barely functional.

 

[00:02:39] Speaker 2 Maybe we had email and not everyone had an email address. Yeah, but it was definitely in the early days for the world has changed quickly, hasn’t it? It has. Yeah, I was just talking to a friend today, actually at another mortgage company. He was telling me that they’ve got some subset of loans now that never see a human. They it’s all electronic. They pay in the employment data, they pull in the deposit information, they run it through an automated underwriting system and either goes right

 

[00:03:11] Speaker 1 to

 

[00:03:12] Speaker 2 they grab everything. Yeah, because there’s so many databases these days with, you know, deposit information, employment information, they run it through the scoring model and boom, you’re approved.

 

[00:03:25] Speaker 1 It’s amazing. Yeah, yeah. Yeah, technology’s come along.

 

[00:03:29] Speaker 2 It’s come a long way. Yeah.

 

[00:03:31] Speaker 1 So so let’s talk about so, you know, one of the one of the things I think that’s really I think generally people understand mortgages. I think I think our our audience is is fairly well seasoned. I think our our audience probably is that we’re not we don’t have a lot of first time homebuyers, maybe listening, but we do have some, but we’re really heavy in the construction to perm space. And I think maybe give us give us a rundown of how does it could just just kind of briefly because we have had other episodes where we’ve talked about this, but kind of give us a brief synopsis of how does a construction to perm loan work just yet?

 

[00:04:09] Speaker 2 Generally, construction of home loan works, our programs a one time close. So what it does is it allows you to close one time it builds in the construction part over 12, 15, 18 months, depending on how much time you need. And then without having to do a second closing converts from the construction phase to the permanent phase and is, you know, fully amortized over the remaining term of the loan. Mm-Hmm. The attractiveness of it is you qualify today based on your current situation. We close you and that’s it. It’s like a one and done type of thing. So whatever happens between the time the house is under construction and the loan converts, it doesn’t matter. Right?

 

[00:04:55] Speaker 1 So but you say it’s a one time closed, but is it really, though? Is it? I mean, because don’t you technically have to do it close at the beginning? And then

 

[00:05:02] Speaker 2 it’s. The second part when the House, when when the builder hands the keys back to the owner, right, is called a conversion.

 

[00:05:10] Speaker 1 Right. So that’s just a tricky word for

 

[00:05:12] Speaker 2 clothes, isn’t it, though? But it’s really not a closing because there’s no title fees. OK, no transfer tax. Right? Basically, it’s just the kind of a process where the buyer accepts the home from the builder. Right? Yeah, we’re good. Yep. And then keys go back to the homeowner. Right? Move in and everything is done. Yeah.

 

[00:05:35] Speaker 1 But then there, when you call it a conversion, that’s when they’re really taking possession of their 30 year fixed mortgage or their 15 year arm or whatever it is, you’ve decided to rest for that. Yeah.

 

[00:05:45] Speaker 2 So the timing? Yes. So the timing on the conversion also triggers the time when we converted from the construction phase to the

 

[00:05:53] Speaker 1 permanent phase, right? Right. So the first part of the loan is is a line of credit.

 

[00:05:58] Speaker 2 It’s essentially a line of credit. The the borrower will pay interest only on the amount advanced at any given time. So as you’re going through and completing the house, you’re drawing more and more down on the line that set up for the construction loan to get to a point where you’re done. And then, you know, that amount is the amount that converts over to the fully amortizing phase, right? And the borrower just starts making regular monthly payments, right?

 

[00:06:27] Speaker 1 Right. That point. So what happens at the end? Right. And I think the more one of the great things about me doing this podcast is, I’m learning so much that I had no idea how much there was that I didn’t know. It says you don’t know what you don’t know. You don’t know. So, you know, I’m learning that at the end of the process, different lenders require different things with regard to like, for example, a rough ride or residential use permit, or some people call it an occupancy permit. There’s a lot of different names for it. But when you get to the end of the transaction and the house is nearing completion, what do you need it citizens one to get the loan closed and how do you guys handle that process?

 

[00:07:07] Speaker 2 So generally, what happens is you get to the point where you’re pretty much done. The builder will request what’s called a final draw right, which will be the remaining amount he needs to close out everything at that point. Typically, the houses is finished and you can call the county and say, come out and give me an occupancy permit. Right? We’ll also send the appraiser back out to do a final inspection to be sure that the house was built actually, per the plans and specs that we had a year ago when we first closed the loan. Right. Every once in a while, we get some different houses that were built because they changed things along the way and didn’t tell everybody, Yeah, yeah. So we send the appraiser back. So once we have the certificate of occupancy, the final inspection and then the title company clears us along, the mechanics leans right. We’re good. We’re done.

 

[00:08:01] Speaker 1 And that can take some time. So, so basically, the house can be completely finished and done and sitting there, and nobody can really move in yet.

 

[00:08:10] Speaker 2 So it’s all it’s, you know, as with anything, it’s a process. Some of these things can happen concurrently. Some of them have to happen in stages. So it’s best if the builder, you know, the earlier they can request their final draw and know the date that they’re going to have the I don’t know what you call it when you hand the keys back, but you know, whenever that conversion date is, you know, a week to 10 days is typical right. And because for us, it’s not the same with all lenders. We do want the appraiser to come out and do that final inspection before we’ll do the final day down on the title bar. Right, right. So that’s where it gets a little hinky just because

 

[00:08:53] Speaker 1 everybody’s got their own.

 

[00:08:54] Speaker 2 Yeah, we got it. Yeah, we got to get that in before we can do the next thing. Some people do it simultaneously, but by doing that, you run the risk. If if mechanically happens to hit between those couple of days before you’ve got the title date down and you’ve turned the keys over back to the borrower, there’s some potential risk.

 

[00:09:15] Speaker 1 Right? Right, right. Right. That makes sense. So so what advice would you have for people that are thinking about going into a transaction like this?

 

[00:09:28] Speaker 2 So it’s it’s it really is. As you were saying earlier, it’s really more for somebody that’s a seasoned homeowner. Generally, you know, the demographics that I see are people that have lived in their home for some period of time, maybe five, 10 years. They love the area, but they don’t want to go through the process of having to sell their home and try and buy another home, especially in in the resale market. Sure, sure. So they love the location. They just, you know, their house is David, or it’s not big enough or whatever number of reasons they. Have so they look to a custom home builder to come in and either do a major renovation or complete tear down and build on the house they want on their own lot, right, which allows them to stay in the school district and keep their friends in the neighborhood. And it, you know, the biggest thing I don’t know what you guys have seen with design lately, but you know, masters on the main or a big thing right

 

[00:10:29] Speaker 1 now, right? Well, you know, it’s it’s really funny you bring that up. I, the main level master, is a really tricky floor plan because there there are a lot of people that want them and there are very few homes out there. They’re very difficult to sell. You can never seem it’s sort of like dating, right? Right. There’s never the perfect house on the market with a first floor master when you’ve got the buyer who wants a first floor master. So there is a there is a pretty good demand for building them. And I think as our population ages and as time goes on, I think that market will be easier to to tap into. But another trend, though, that I’m really seeing is a lot of people are doing a main level bedroom right with a full bath. So it’s

 

[00:11:14] Speaker 2 OK. So it could be a guest room. Exactly. Or yeah,

 

[00:11:16] Speaker 1 yeah. Or maybe they use it for an office. But then if somebody you know, if they’re aging in place and now they can’t get up and down the steps anymore, they might convert it to a better. That’s an option. It’s kind of a backup. But yeah, there it is. It is. It is a it is a trend, you know? So but so from a financial perspective, when somebody is getting ready because because to me, I always tell people, I’m really high level, right, I don’t get into the detail because you do that, you know, and everybody is unique and everybody has their own unique financial situation. But I tell people that the banks and correct me if I’m wrong, are generally more conservative when they’re lending money on on a construction loan, you’ve got to have a little more cash reserves in the bank. You need to be a little more of a stable individual in order for the bank to feel comfortable lending you the money. And the reason I tell them that is because the bank is lending you money and then you’re tearing down the asset that’s there and you don’t really have an asset to replace it for a period of time. So they want to make sure you’re your stable and liquid. So talk a little bit about that.

 

[00:12:18] Speaker 2 Yeah, John, that’s a hundred percent correct. So the unique thing about these construction loans is that the people you know, they they you’re right. I mean, we’re going to tear down the collateral. It’s not going to be there. So we want to be sure that first of all, the people have the wherewithal to make continue to make the payments during the construction phase, which are really just interest only. But they may also be renting a place where while the construction is going on so the you know, they have a little bit of an extra payment, even though it might be temporary. That’s why I would like to be sure they have some additional cash reserves. Then you might just get on a regular resale or refinance. The other thing about it is we do this one time close thing. So we want to be sure that the people have stable employment because when it comes a year from now, when it’s time to do the conversion, we want to be sure that, you know, not much has changed, even though we can’t do anything about it, but we just don’t want them to be in a situation that’s financially harmful that would lead to some other situation.

 

[00:13:27] Speaker 1 Right. So so let’s just say, because I’ve run into this a lot where somebody has gone online and they go to a mortgage calculator and they want to buy a house, that’s one point three, and they put in their numbers. So and then they feel like, OK, well, I might just buy land and build a home, and they’re using that same data, and it really gets complicated right to try to manage people through it through this process. But if somebody qualifies for a loan that’s like 1.2 million on a conventional mortgage and that’s really the max that they’re going to be able to do. Do you have any kind of a rule of thumb? No. What? What might they qualify for in a construction loan?

 

[00:14:05] Speaker 2 It, you know, it’s probably not much different because again, people each have their own individual situations with other obligations car loans, rental properties, student loans, things of that nature. So it’s hard to just bring a blanket statement.

 

[00:14:22] Speaker 1 Yeah, right? Yeah.

 

[00:14:23] Speaker 2 But generally, yeah, I mean, if they qualify for a million to on a regular loan, they should qualify generally for a million to on a construction loan. You know, the the issue in the construction loan also is the equity piece, right? So they also, you know, again, if you want a home for a substantial period of time, you know, you probably have some decent amount of equity in the home, as is, which will certainly go a long way to helping you, you know, for for a rebuild in connection with another home. Mm-Hmm. If you’re looking to buy a lot and then do a build, you pretty much. You have to have 20 percent equity of the future value of the homes, so right, even though the lot may be, say, eight hundred thousand today, if the total project you know the lot, plus the construction is a million six. You know, you may you may need 400000 worth of equity as opposed to something much less.

 

[00:15:23] Speaker 1 Right, right. So and you’re down payment on the lot is applied to that. But more or less, it gets kind of murky because it’s.

 

[00:15:31] Speaker 2 Yeah, I mean, certainly a portion of it is. And but again, you’re the say, the 20 percent requirement is going to be based on the total project cost.

 

[00:15:40] Speaker 1 Right? Right, right. Right. Great. All right. We’re going to we’re going to day and we’re going to take a quick break. We’re here with Dan Aminah if he is the branch manager of Citizens One in Falls Church, and we’ll take a quick break and we’ll be right back. So we’re back with Dan Aminoff, and he is the branch manager of Citizens One in Falls Church. So we’ve been talking about construction loans. Let’s just talk a little bit more about construction loans and then we’ll go on to some other topics. But what do you think? Are some of the keys to having a successful transaction when you’re building a custom home with with a construction loan?

 

[00:16:17] Speaker 2 So the you know, the main key is to is to pretty much know what you want upfront. And so when you when you meet with the builder and, you know, maybe they’ve got a catalog of homes, you know, once you’ve chosen the home that you want, the next thing to do is is kind of the details, the finishes, the granite flooring. Try and do as much of those upfront as you can. And if you can’t, you know, at least know that you want to do hardwood floors so that we can build in an allowance for that amount into our cost projection, right? Because we’re going to do an appraisal based on the plans and specs. But we also, even though you may not be ready to do some specific, you know, the outlets go here or there or whatever, we need to generally know what the house is going to contain because we have to do our appraisal right. And you know, the more data we have to complete our appraisal, the higher the value you’re going to get, which makes it, you know, that much better for your transaction, right?

 

[00:17:26] Speaker 1 And I think that’s one of the things we do is Stanley Martin, Custom Homes is we give our buyers because it is really hard. So I have I have built homes personally. I have bought homes from builders personally over the course of my life. And it’s really hard. I mean, I understand what it is to have to try to make those decisions so I can take my own experiences and and I have and I bring it into the Stanley Martin program, where we give our buyers data upfront where, like you said, we give them the pricing for hardwood floors. So if they know they want hardwood wood floors, they have that pricing information right at the very beginning. So when they start their loan process with you, our buyer should have a really good handle on what they may want to spend on finishes doesn’t mean they have to, right? But at least we have a good start. And boy, the whole design process. Once you start picking cabinets now, maybe you don’t want hardwood floors anymore, right? You know, so it’s actually

 

[00:18:20] Speaker 2 so it’s so it’s tough. So that way. Yeah, exactly. And like you say, you know, maybe they want hardwood floors and all the bedrooms. Yeah, you know, that’s fine. And we can certainly account for that upfront. But at the end of the day, if you want carpet, that’s fine because it’s probably a lesser cost.

 

[00:18:35] Speaker 1 So the the challenge is you’re trying to figure out what is going to be the total at the end of the transaction. And if you don’t know if you want hardwood or carpet, then you don’t know. And if you start with hardwood and you start with your initial appraisal with hardwood and then you build a home with carpet, now you’ve just devalued the home slightly. Right. So it may impact your your equity position.

 

[00:19:02] Speaker 2 It could have some effect. And you know, the buyers or, you know, the borrowers. So they yeah, they may, you know, they may, you know, again, they they may not know upfront. But if if, if they can come up with a cost that you know, we can work with with, you know, x amount of finishes that allow us to get the appraisal done and then, you know, we can go from there, you know, in the scheme of things, you know, the type of granite you have on your countertops and some other things aren’t going to, you know, be a huge mover in the overall value, right? Things like the completely finished basement versus an unfinished basement. Yeah, those will get you good

 

[00:19:49] Speaker 1 dollar, right? Square footage finished.

 

[00:19:50] Speaker 2 But yeah, we’ll get you dollar for dollar in terms of value. But that’s and people change their mind a lot. So, you know, for us, if we can get to a point where they can, you know, be comfortable with, you know, the valuation and the cash investment at the time, we’re doing the loan that will, you know, and we build on some allowances for some other things that will allow them to close, right? Get the project underway. Yeah. And then they can go to the design center and right and figure it all out.

 

[00:20:20] Speaker 1 But like you said earlier, they should communicate with you. Right. So if they start making some changes, then legs let let you know.

 

[00:20:26] Speaker 2 Exactly. So if they, for example, the biggest one we seem to get all the time is like a screened in porch that they then want to enclose and make more of, like a sunroom kind of a thing. Right? That’s you know, that that could involve some structural right type things that, you know, you know, will make a difference in terms of the overall square feet and cost and all that type of stuff. So if you make any of those changes while you’re kind of have your loan in process, we need to know about.

 

[00:20:55] Speaker 1 Right, right, right. Good, good. So let’s that’s that’s that’s that’s really good information on construction loans. So are there any other lending tips or advice? You know, let me just say my advice to anybody listening who’s thinking about building a home? Get in touch with a lender and really start the process with your lender very early on. I think a lot of buyers get deep, deep, deep into the process before they ever reach out to a lender.

 

[00:21:22] Speaker 2 Yeah, I would agree, John. The you know, the there’s two parts of these construction loans. There’s, you know, the credit piece that you would have with any type of real estate loan. And then of course, you have the project piece, which people are more focused on because, you know, they’re building a house. But yes, they need to be sure that they have their ducks in a row on their credit piece. You know, that includes, you know, your pay stubs, W2s, tax returns, bank statements. You know, if you get everything online and you haven’t downloaded them or you you know you, you don’t know where to go to get them early on in this process is probably the time to start gathering those. Figuring it out to get those things together, maybe put them in a, you know, in a shared drive of some sort just, you know, keep them secure. But, you know, have them ready to be sent to the lender when it comes time to apply for the law.

 

[00:22:19] Speaker 1 Right, right, right. Just good advice and advice. So let’s talk a little bit about you. So, so what are your so you’re in a leadership role, obviously at Citizens one. So what advice do you have for folks that maybe listen, we have a lot of entrepreneurs that listen to our show and a lot of people that want to get ahead. What advice do you have for folks like that that may want to go into the banking industry?

 

[00:22:45] Speaker 2 Yeah. So the you know, the key thing, you know, as with any business, as with any relationship, you know, communication is always key. So. And be upfront with people about what their situation is. You know, from a lending standpoint, somebody comes to me and they want to build, you know, a $3 million house, but they can only afford a $1 million house. You know, you need to tell them that, right? This is kind of where you’re at, right? You know, you may be able to do this, this, this and this to get to the point where you can then afford a $3 million house, but you know you’re not there right now. Oftentimes, like you were saying earlier, I mean, I’ll get people that, you know, they spend time with the builder. They fully design this house and they come to me and I’m like, Well, you know, yeah, I don’t know how you’re going to do this because you will only qualify for X amount of the loan, right? And if you don’t have the cash to bring in, know the difference. It’s it’s a problem. You know, it’s funny.

 

[00:23:45] Speaker 1 It’s funny thing. I I tell people this every day and it’s the absolute truth. Everybody has a dream and everybody has a budget, and the dream is always bigger than the budget. It always it is. And you know, the people that have really big budgets like two million and $3 million, they have a $5 million dream. You know, your folks that have a million dollar budget or a million and a half dollar budget, they have a $1.7 million dream, right? So the gap is a lot closer.

 

[00:24:16] Speaker 2 Exactly. Yeah, exactly. And so. So yes, it makes sense to talk to a lender, you know, as soon as you’re kind of engaging in this process. Plus it is, you know, as we were saying earlier, it’s a little bit different in terms of the qualification and the cash reserves and the things you need to have. So. So we just want to be sure that that that’s all dialed. Sure. Sure, sure.

 

[00:24:37] Speaker 1 So, so do you have any keys to your success? You know, kind of shifting gears a little bit. What, what, what what things have you done in your life that have helped you achieve success?

 

[00:24:52] Speaker 2 The key thing is is being organized and having a system, you know, in the mortgage business, it’s it’s, you know, fairly commoditized. So, you know, they’re doing a loan today is not much different than doing a loan 40 years ago, right? So as long as you have a system and you know, certain things happen at different times in the transaction and you make everyone aware of that, yeah, every transaction will go fairly smoothly, right? If you know, if you’re disorganized and spread too thin, you can overlook something. And you know, all of a sudden everything’s going to fall apart. Right, right. It’s like a house of cards.

 

[00:25:34] Speaker 1 Yeah, yeah, I get it. I guess

 

[00:25:35] Speaker 2 so. You know, my key is to stay organized, stay on track and be able to track everything individually.

 

[00:25:42] Speaker 1 Right? Fantastic. So Dan, is there anything else you want to add before we close out the episode?

 

[00:25:50] Speaker 2 You know, John, I mean, it’s it’s a great market to be doing loans in. You know, the the D.C. market has been my my home for almost 25 years now, and it, you know, the one thing that never ceases to amaze me is the amount of cash that’s in this marketplace.

 

[00:26:07] Speaker 1 It is unbelievable. It is surprising

 

[00:26:09] Speaker 2 when people tell me they’ve bought this lot or bought this house for, you know, north of a million, two million in cash and never ceases to amaze me. Yeah.

 

[00:26:20] Speaker 1 So yeah, I agree with you. And you know, you don’t yeah, you don’t know what you don’t know. I said that earlier in the episode, but it’s it is when you get into the real estate industry in this in this market. And I mean, you’re you’re almost the capital of the free world here. I think we still are you. You do run into a lot of surprising situations and people mostly good.

 

[00:26:44] Speaker 2 Yeah, mostly good. And and for those that need financing, you know, we’re we’re here to help them.

 

[00:26:49] Speaker 1 So fantastic. Well, Dan, thanks for coming in. We’ve been chatting today with Dan Aminoff branch manager of Citizen’s One Mortgage with in Falls Church, Virginia. And you can contact Dan through our website. We’ll put the information online. So, Dan, thanks for coming in.