One of the most common questions people have when looking into building a log home is financing. Often people assume that because it is a log home kit that it is more difficult to get lending. That is not at all the case. We talked with Terry at Lok N Logs log homes to get more insight to this question. It is important to speak with a lender before designing your log home. This will help you figure out what you can afford to build. The great thing about log homes is that they are customizable, allowing you to get the most out of your money via your own design.
What type of loan do you need for a log home?
Many people assume they need a different type of loan for a log home kit. A log home kit will require a new construction loan. A new construction loan can cover your log home kit, site prep, and the assembly.
What are the typical down payments for a log home kit?
In most cases a new construction loan will require 20%. In the case of a log home, if you already own the land it could be as low as 15% down payment. This will of course vary depending on your credit, collateral, and other factors.
What do I need to get a loan for a log home kit?
The simple list for the things you will need to get a loan for the entire build are:
- Finacial documents
- Two months pay stubs
- Two years W-2s
- Two years Federal Tax Returns
- Two months bank statements
- Signed construction contract, contract of sale for the land, plans and specifications, and log home kit quote.
How does a construction loan work?
The construction loan will typically create a disbursement schedule and pay in what they call draws. According to M&T bank, the typical draw schedule looks as follows:
- Draw: Completion of Foundation
- Draw: Delivery of Log package
- Draw: Stacked, Roof Complete, Windows and doors installed.
- Draw: Mechanicals (Electric, Plumbing, HVAC) Complete
- Draw: Appliances, Cabinetry, Finish Flooring installed
- Draw: Finish interior work completed; home ready to be occupied
Here are where to find lending for your log home kit.
Your local lender.
According to Terry at Lok N Logs. The first place you should apply is your local lender. The reason for this is that your local lender will be more interested in lending to your area. It can be hard to convince banks that are not in your area to lend to that specific location. You are also more likely to have a relationship with your local bank.
Farm credit is geared towards helping ag and rural homesteads. They are a great lender to work with and have great offers for log home builds. They also offer mortgage solutions for buying/fixing rural log home properties. You can see where they are in your state on their website HERE.
M&T Bank is a bank known for lending to log home kit builds. They are typically great to work with and have experts that know the building process. They are bank that you can check with and compare offers.
Large lenders can often compete with your local lender on rates. Once you get your pamphlet together, it might make sense to check with some larger lenders to see if they can beat the rate given to you by your local lender.
HELOC or Line Of Credit.
If you own your current home or own the land that you are building on. You may be able to borrow against it using a HELOC or personal line of credit. If you use a HELOC just remember that when you sell your house the HELOC will be due at sale. For a HELOC it is often best to ask the lender that currently holds your mortgage.
Building your dream log home is actually more attainable than most people think. The important thing to do is to write down your options and compare them. You never know until you check!