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RV financed yet?

Posted by on July 10, 2010

As you can imagine, purchasing our Serenity II dream home wasn’t like walking into a car dealership and arranging financing for a new automobile. It’s more in the category of buying a small vacation cottage. But we weren’t worried. We banked at Citibank, where we had a “Gold Customer” rating through our relationship with Citibank and Smith Barney, the brokerage arm of Citigroup. Plus we own our home outright, don’t have any large debt, and we pay our credit cards off every month. The ideal customers —or so we thought.

 You may be wondering if Citibank had the best loan options. As absurd as this may sound, that wasn’t something we considered at the outset. Manny and I are the loyal customer types. Price is not always the first thing we think about —customer service is. Jill Marple McCabe, our local Citibank branch manager in Chestnut Hill, Pennsylvania, treated us like her most cherished account holders. Manny even sent a Christmas card to his favorite personal banker, Clarissa Porter.

 The RV dealer we dealt with had suggested that we get a home equity loan rather than an RV loan (where the interest is usually higher, around 6-8%). Since there was plenty of equity in our home, the loan officer at Citibank confirmed that a HELOC —that’s “Banklish” for home equity line of credit— was the way to go. We filled out the preliminary loan application, answered some cursory questions, and left the bank convinced that we were great prospects. Boy, were we in for a rude awakening.

Because we had inherited our home and had never paid off anything larger than a car loan, Citibank was reticent about extending us credit. We supplied them with the requisite two years of tax returns, bank statements and our award declarations from the Social Security Administration. (I would be receiving early social security checks starting July 2010 that would be more than enough to cover the monthly payments.)

Then, we started getting the run around. First, we received letters saying they couldn’t find any credit ratings for us. Next, they grilled us on our use of a mailbox address rather than our home address. Finally, they questioned the validity of our property title. Although Jill, our local branch manager was working overtime for us, we felt like Citibank was not going to give us the loan and we needed to start looking elsewhere.

Rob Block, our accountant, put us in touch with Jay Moderski, a friend of his at Gateway Funding. Jay suggested we talk to TruMark Financial Credit Union. Several of his clients had done business with them and were delighted. Their terms were straightforward: monthly payments would be 1% of the principal plus interest. The going rate is 3.99%. I was astonished at the openness of this information; it was even on their website.

In contrast, to find out exactly what the interest payments and terms would be with Citibank, it had been like pulling teeth. Finally, our Citibank branch manager told us that it would be prime +1.50, which amounts to 4.75%. Citibank makes their loans sound very attractive: for the first ten years, they charge interest-only payments, with the principal due in the next five years.

On a $100,000 loan, that would be about $400 per month for 10 years, very manageable you might think. Yes, but then, with $100,000 due in five years, your monthly payments will suddenly jump to $1666.00 per month. Quite a chunk of change.

TruMark’s Agreement requires payment of 1% of the principal each month, plus the 3.99% interest on the remaining balance. The first month will be the most we ever pay, $1333, with each month’s payment diminishing as the principal decreases. Optionally, we can continue to pay the $1333 per month, paying the HELOC off sooner, with no penalty. Paying some of the principal each month keeps you on track.

With TruMark there was no charge for the appraisal or title search done on our home, and no other hidden costs or fees. With Citibank we would have been required to pay $250 for the appraisal and indeterminate closing costs on the transaction.

At Citibank, we had to deliver reams of paper records to the local branch, which our bank manager diligently faxed to the Home Equity Line of Credit Department for review.  She had to wait for answers from a succession of at least three people. It took from June 9 to June 29 to find out we were turned down.

We called TruMark late Thursday morning, June 17. Our loan officer, Diane Blackwell, conducted the entire process by phone and fax, and seemed eager to have our business. Within 3 business days, on June 22 we received conditional approval. TruMark had no difficulty ascertaining that we had a 750 credit rating (the highest being 800). On July 1st we got a congratulatory letter with final approval and by July 8, were sitting in the bank for the final closing of the transaction.

So don’t delude yourself into thinking that just because you bank at one of those banks that were “too big to fail” and received billions of dollars in bail-out money, you’ll be guaranteed to get a loan. Our advice to you is simple: shop around. Go to your local credit union; they really want to lend you money.

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