We want to renovate. The bank wants us to decorate first.

What price charm? Here is a white wood-frame house with high ceilings, window seats in four rooms, a fireplace, and a stone garage tucked away in the rear. It is situated on sleepy Woodlawn Avenue in the Kidd Springs section of Oak Cliff. There are four fig trees in the yard. Morning glories grow along the front walk. In the back, a man-made fish pond is surrounded by lush evergreens.

The house needs work, lots of it: Wall-paper cascades to the floor in sheets, floors sag, a section of the flooring has been eaten away by termites; the paint is cracked, the kitchen and bathroom are ill-equipped. But the house was built in 1913 by T. A. Hord, Sr., son of the pioneering Oak Cliff settler William H. Hord, and it stands today without structural deficiency or regard to the glass and brick of this sleek city.

Enter two working journalists who’ve known apartment life for five years and have had all the wall-to-wall shag they can stand. We love the house, its wood floors, tall windows, wrought-iron lanterns, bead-wood porch ceiling. It costs $13,500. We want to buy it.

If ever we’ve felt financially powerful, it is now. The plan is simple: We’ll get a mortgage – what the hell, even 20 percent down on $13,500 is peanuts – and use the power derived from cash savings, however low-level, to get real value in the renovation game. Sheetrock walls, a redesigned kitchen, central heat and air . . . it’ll cost $12,000 to start and take at least six months, but it’s our baby. We’ll have the work done at our own pace and have complete say over who does it. And we’ll do some ourselves.

We go to the bank – the Carrollton Branch of the First Texas Savings Association – and request a 15-year, $10,800 mortgage. Our credit, earnings, and personal statistics all appear to be fine, says Mary Squires, our loan officer. All signals are go. We should hear from her in a couple of days.

As the days pass, my wife and 1 become a little cocky. We joke about our “peanut mortgage.” We check back with the bank regularly and are told each time that all is well, we’ll hear in a couple of days – even “tomorrow.” Then, 21 days into the 22 we have to secure financing, the news changes.

Over a bad long-distance connection to my hotel in Atlantic City, where I am vacationing, Mary Squires tells me a decision has almost been made: We’ll very likely get the mortgage if we agree to wall-paper the living room, dining room, and bathroom; repair all cracked window sills; paint and lay linoleum in the kitchen and enclosed porch; hang ceiling wallpaper in both bedrooms; install new kitchen cabinets; level the foundation; and otherwise patch up. One final condition: The bank will probably require that all improvements be completed in 60 days. We’ve heard none of this before.

My wife and I want to renovate; the bank wants us to decorate first. Gingerly, I ask Mary Squires why the bank wants to complicate such simple proceedings by requiring stray and cosmetic repairs on a home that will be completely restored.

“Our risk is, what if we foreclose? What do we do?” she asks. “We just don’t know what the appraisal is without those improvements.” We bat it around a while longer, but hit an impasse. Would I talk directly with the appraiser?

It’s not the appraiser’s job to talk to me, but he does. He won’t tell me his appraisal, but he is sympathetic as I explain that we don’t want to perform nearly $4000 worth of forced touchup work when we already have a six-month renovation plan worth nearly the sale price of the house and expect eventually to spend $6000 beyond that. He agrees with me that we would be placed in an untenable situation.

Here is a reasonable fellow, I think. I want him to remain so, perhaps even to soften, since this voice 1,800 miles down a hissing phone line is going to have final say. Our combined earnings, savings and assets, credit references, friend in the White House. . . none of it will matter if this voice tells the loan committee that our Woodlawn Avenue house doesn’t translate into $13,500.

It’s not the appraiser’s job to tell me my options, but he is kind enough to research a few. After checking with his boss, he calls me back in Atlantic City with alternative plans we could take up with the loan officers. We might, for instance, want to apply for a second loan – a renovation loan, which would be “wrapped up” with the mortgage; the bank would disburse the renovation funds as the jobs are completed. Or we might have a general contractor get interim financing, during which time he improves the house for the benefit of another, more favorable appraisal in the future; the bank would then close on our mortgage. Option three separates the men from the boys: We could renovate the house before purchasing it – improve someone else’s home with our cash savings – and then apply again for the mortgage. Assuming, of course, the bank would raise its appraisal and that $13,500 would remain the selling price.

We dig our heels in and insist on the mortgage-only plan. But we make an attempt to show our good intentions: We agree in writing to First Texas’s patchwork improvements. And we include in our application a statement indicating we will, by December 30, spend $7860 on improvements above and beyond what the bank requires.

We lost. On a rejection form with 23 check-off boxes indicating “principal reasons for adverse action concerning credit,” all were left blank except the 23rd, “Other.” The explanation was crisp: “Appraisal report does not warrant loan requested by applicant.”

Instead of the mortgage, the bank gave us an installment loan for $9600. Like an auto loan, it comes at a higher rate of interest (10 percent instead of 9.75) and is paid back over a shorter period of time (10 years). Our down payment went from $2700 to $3900, or 28.9 percent of the sale price.

People laugh when they hear this. Two steadily employed people with a combined income over $30,000 and savings and assets exceeding the sale price of the house (deposited, thank you very much, at First Texas Savings). Busted on a peanut mortgage. They all laugh except my brother-in-law, a banker turned financial consultant. He laid it out the night he taught me to play blackjack: Banks exist to make a profit. They want to lend lots of money. They don’t like to take risks.

In 1977, the City of Dallas issued 5658 permits covering $20 million in “additions, alterations or repairs to residential structures.” A considerable chunk of this $20 million went for home renovation, city officials estimate. The city, the banks, the people – nearly everybody in Dallas is pro-renovation. Just ask around.

Ask Norman Pender, for example. As chairman of the Oak Cliff Chamber of Commerce’s Rehabilitation Committee, Pender is pro-renovation. As executive vice president in charge of lending for First Texas Savings, Pender is also pro-renovation – to a point. That point is $10,000. “When you go below $10-11,000 on a term longer than 10 years,” Pender says, “the profitability factor is not real good, to us.” Yet even that makes Pender’s bank more pro-renovation than many other lending institutions around town. When we shopped around in the beginning, Exchange Savings and Loan wouldn’t dip below $28,000; Equitable Savings and Loan, $15,000; Republic Savings and Loan, $20,000. First Federal Savings told us they never issued loans for “redo’s.”

Unfortunately, many houses that are ripe for renovation, including ours, have selling prices at or below the minimum mortgage lending levels of banks. It is a problem that is taken care of by the most popular financing package offered by banks to people who want to buy and restore a house: Mix the mortgage loan with an additional loan to cover the renovations. This ensures that the total amount will be large enough to turn a profit for the lender, and that needed improvements will actually be completed within a given amount of time, minimizing the bank’s risk in case of foreclosure.

But this isn’t the best deal, if you can afford to stay out of it. First, the bank keeps the renovation money locked up in an escrow account, while charging the borrower a handsome rate of interest. Then the bank customarily requires the use of a general contractor, who can subcontract to the electrician, plumber, and carpenter of his choosing – not yours. Finally, the bank usually sets a time limit on completion of the work. Although the bank needs your signature before paying the contractor with your renovation money, by having the bank as a partner in the restoration effort you’re effectively doubling the number of bosses the contractor has. Thanks, but no thanks.

By insisting on a mortgage without a renovation loan, we pushed the bank to the wall. But arrangements could still be made for a mortgage, though not to our satisfaction. An officer at Oak Cliff Bank and Trust, for example, told us that if we wanted only the mortgage, his bank would consider holding our savings in escrow, disbursing them to a contractor as restoration was completed.

My brother-in-law says that our plans were nice but that they didn’t take into account the “practicalities” of the situation. I told him the practicalities of our situation: that we signed a sales contract giving us 22 working days in which to find financing; that a green appraiser for First Texas Savings had been incapable of evaluating our house, requiring the subsequent involvement of a more experienced appraiser; that delays caused by the bank ate up all the time we had to shop elsewhere for a mortgage; that we were continually given information that led us to believe the mortgage would be coming “tomorrow”; that the whole thing was a comedy of errors.

We love our installment loan. We’re hard at work on the house. We’re delighted, so far, with our subcontractors.And we haven’t thought much about thebank lately. The last word we had fromthem was over the phone, when our loanofficer called the day after the closing papers were signed to inquire when the closing would be.


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