Will My Bank Finance My Log Home?

Most banks and mortgage companies have never financed a log home, particularly in the construction phase. Therefore, you may find many of them unwilling to take on the perceived risks. The ones who are unfamiliar with log homes but are willing to give you a chance may require you to produce a mountain of paperwork and agree to unusual terms.

Bank Concerns

There are three primary concerns that financial institutions can have with your log home:

Log homes have a different construction process - The main concern here is that most log home companies want to be paid up-front for the kit that you buy from them. This can amount to as much as half of the total cost of construction. Banks are accustomed to releasing construction funds more slowly, after work has been done, not before. The risk is that they could be left holding a relatively worthless stack of logs if the project goes sour.

Comps are hard to find - Banks and mortgage companies use recent local comparative home sales ("comps") to estimate the market value of your finished log home, in order to establish a loan value. If you live in an area in which there are few log homes, and there have been few recent sales, it is difficult to appraise a new log home in that area. In this case, they may simply decide not to finance you, or to significantly reduce the amount that they are willing to loan to you.

Self-contractors are a risk - If you plan to be your own contractor on your log home project, many finance companies and banks will not want to take the risk. If they do decide to take a chance on you, you'll be required to submit detailed cost estimates and schedules, and prove to them that you can do the job. Using a professional contractor with an established project history can be much easier.

What to Do

Finding financing for a log home may require a little more legwork than for a conventional home, but don't despair. Log homes are being financed every day all over the country.

There are number of national lenders who specialize in log home mortgages, or who have divisions that specialize in such mortgages. Among these are American Log Mortgage, M&T Bank, Log Lenders of America, and Merrill Lynch. These companies understand log homes and are easy to work with.

However, if you are building in an area in which log homes are popular, local banks may already be financing other log homes, and may be good alternatives. Even if you are not building in the area normally served by those banks, they may be able to help you.

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