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.
