You have an array of financing options to help make your log home dream a reality. But the lending landscape has changed in recent years, and it’s important to learn more about the process before you begin searching for financing for your new log cabin home.
Important Factors to Consider in Financing Your Log Home
Finding lenders who will finance log homes.
Not all lenders are offer loans for new home construction, so it can help to work with local lenders and/or lenders who have a history of providing log home mortgages. Southland Log Homes has been building relationships with national and local lenders who understand log home construction and who can help you finance construction of your new home.
Lending requirements have shifted.
The financial landscape has changed dramatically, and those changes have impact how you can finance a log home. Construction loans now require larger down payments, so you may need to budget and plan on putting down 20% equity in cash and land value. Documentation requirements are stricter as well. Most lenders require income verification, tax records and investment information for the last two years or more.
Appraisals are especially challenging for log homes.
Since fewer log home owners sell their properties, it’s more difficult to find comparable sales prices in the area where you’ll be building. It can also be hard to judge whether a log home design is under- or over-built for a particular area, both factors that can affect whether a loan will be approved. Let Southland’s expert design team guide you in the design of your log home plan.
Tips for Navigating the Financing Process
Consider a home equity loan.
If you currently own your own home, you may be able to use a Home Equity Line of Credit (HELOC) to finance the construction of a new log home. Such loans can often be faster and less complicated than new construction loans.
Do some quick loan calculations.
To see whether financing your dream log home is feasible, do some quick, back-of-the-napkin calculations. Use our simple financing tools to get a good idea of the near and long-term costs. Keep in mind that there may be other costs involved in addition to your down payment.
Check to see if your lender does a “one-time-close.”
Some loan processes for new construction will include two separate sets of closing costs: one before you break ground on your new log home and one once construction is complete and you close on mortgage for your new home. You might save significantly on those costs if you can combine them into a single closing. This usually involves a “construction-to-permanent” loan which simply converts to a regular mortgage after the house is finished. Ask your lender for details on this process.
Ask about payment schedules for materials.
Although Southland Log Homes only requires a small down payment to get started and no other payments until the materials are delivered to your job site, many companies require multiple payments during the manufacturing of your home. The challenge here is that many lenders won’t pay for building materials until they are actually attached to your home’s foundation. You’ll want to coordinate with your contractor and lender to make sure your loan payment schedule keeps these factors in mind before construction begins.
Make plans with multiple lenders.
It always pays to be prepared. If financing with one lender falls through, you can always have a backup lender who will be happy to finance construction of your new home. Preparing multiple lending options will help prevent construction delays and keep you on schedule throughout the entire process.