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Construction Loans & Appraisal & log home mortgage companies?

We are in the process of securing financing for our log home in Pa . We are working with one local bank that we need to get our builder on their "approved" list and wants to make sure they can work with the manufacturers draw schedule. I have been shopping around checking all our options. One local bank told us there is NO Way we will get financing for our home...from any bank..because of the appraisal process. Does anyone have any suggestions on a company that would be comfortable to work with log homes. We have 15 acres that we only owe $9K on and we have it cleared, put the driveway in, septic and ran the electric trench. We have all our blueprints and permits for the house. We are looking to borrow about 220,000. It blows my mind that we wouldn't have enough collateral. There is no way they are going to find comps that have sold in the are in the past 3 to 6 mo. Help!!

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Permalink Reply by Bob Warren on February 26, 2011 at 3:06pm

Michele,

A difficult problem as no matter how much work is done the house will be worth, according to an appraisal, far less until it is 100% complete.

Something I have in my contract and you could try is an escrow account. See if the bank will pay the money according to the schedule into a lawyer's escrow account which the manufacturer can only draw upon delivery. That should satisfy the bank that their funds are secured.

Of course it will cost you more. The manufacturer will now have to fund and possibly borrow to see it through to delivery. You should expect some extra charges because of that.

Its not the best solution but maybe the only option you have with the U.S housing market in such a shambles and every lender scared to take any risk.

And if the company you selected won't go for it call me. I guarantee it will be a better log package.

Bob Warren

Khita Log Builders Ltd.

www.khita.com

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Permalink Reply by Randy Esposito on February 26, 2011 at 8:43pm

Michele,

I use a lender that would have no problem with the comps or the payment on delivery but I'm not sure if they lend in PA. I also have a contact at Citizens Bank in PA that specializes in log home financing. if you would like any of those contacts, let me know.

I never have any luck with Local Banks... they just don't understand any kind of package whether it's log, modular or post & beam.. Plus I don't work with banks that use "approved" builder lists, to me that's a red flag for trouble on my end.. but that's just my opinion.

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Permalink Reply by Steve Daniel on February 26, 2011 at 11:07pm

This may not help directly, but we were able to use a local bank that had a "log home appraiser" and he used "rustic" home sales as comps. The bank was purchased by another bank while we were building and things began to get more difficult. We never even turned in a draw for the 2nd payment on the log package. Foretunately we had $100,000 from a previous home sale and could not have finished the project with out it. But when all was completed, the home appraised for $350 and our mortage ended up at $195,000. Hope you have success.

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Permalink Reply by Tim Bullock on February 27, 2011 at 10:58am

Michele, Your story is being told throughout the country right now and it almost seems to be getting worse. I would keep looking and would look at the National Banks rather than local as they have "your" money to loan you.

I had heard that Wells was still making construction loans as was BB &T.

Good luck,

Tim

www.tamaracklogandtimberhomes.com

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Permalink Reply by Michele Kramer on February 27, 2011 at 11:20am

Thanks guys for your suggestions. I know these are tough times to try and get a construction loan, never mind for an unconventional home. All we can do right now is get as much info as possible and find the best fit for our situation. Hopefully we will get more answers from the local bank we are talking to earyly this week, and move on if we need to. Thanks

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Permalink Reply by shanny on February 28, 2011 at 2:22pm

In Maine, we are all about local banks (they did not fall into the forced banking collapse).
If you have got good credit, conservative financial record...the local bank is where you really should be.

20% down always (its just plain prudent).

I just recently purchased a parcel of land with a local bank, put 20 0r 25% down (can't remember), got 5% fixed rate mortgage (which is good for raw land around here)...and the first thing the loan officer said to me was;

"we are going to do your construction loan too, aren't we?"

Of course I am really "cheap".

I guess it depends on where you live.

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Permalink Reply by CJ on March 3, 2011 at 2:36pm

Hi Michele,

If you don't mind my asking, where at in PA - eastern, central, western? Reason I ask is I'm in eastern PA and may have a few suggestions for you.

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Permalink Reply by Michele Kramer on March 3, 2011 at 3:03pm

We are in north eastern Pa also. I think we have everything figured out. The local bank we bought the property with is helping us out. I just spoke with the underwriter and they will work with the log home draw schedule and feels confident we will get the appraisal needed. I am just getting the box of paperwork together to take to them and I can't wait to get this started. I am still open to your suggestions however. thanks

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Permalink Reply by Bill Tolliver on March 16, 2011 at 7:58am

We went with Wells Fargo Bank. They proved to be the most familiar with log homes and their interest rates were very competetive. (4%) Give them a call.