Unique homes hard to finance

Somewhere we had gotten the idea that the perfect home for us would be a steel frame, metal building. Unique, yes. Hard to finance, definitely.

Fifteen lenders turned us down when we found an existing metal home to purchase. Many considered the property as unconventional. Some considered the home an agricultural building. Most wanted at least 50% down on the property. The ones that didn't mind about the home, didn't want to finance a property with five large barns and cattle pens. They considered it a commercial property.

Talk about frustrating. We turned to a small town bank near the property and found that they were more than willing to finance the property at our terms.

You may not be so lucky. A metal home on a farm may not be what you are looking for, but you may want a 3,000 square foot log cabin with cathedral ceilings and a dance studio. Or you may be looking at building something totally unique.

Lenders don't just look at you, they also make approvals based on the property. The property is their collateral in case you default. You can have a great property and be a lousy borrower, or an excellent borrower with a lousy property. You won't get anywhere. You have to be a good borrower with a good property to get good terms.

The lender is simply looking for a property that they can sell quickly and for as much as possible. Unique homes represent longer selling times to lenders. Foreclosures cost lenders a lot of money, so they like to only finance homes which look like the others in the neighborhood in terms of size, number of bedrooms and style.

These comparables help justify the sale price of your home. When you apply for a loan, lenders will determine whether or not the home is similar to the other homes in the area.

We consider our two-story living room wall of native rock and barn exterior reflective of our lifestyle. But it isn't in the top-ten list of home amenities in the area. The lender's view: if there is a need to sell quickly the home may not get full value.

Unless an appraiser can find several homes like yours in the immediate area, the appraisal for the property is likely to be less than you want. The lender will not lend beyond the appraisal value.

The lender will make the mortgage based on the lower of the sales price or the appraised value. If your sales price is $200,000 and the appraisal is $150,000, the lender will base your loan on the $150,000. If you put 20% down, the maximum loan you could receive is $120,000. You would have to come up with the $80,000 difference at closing.

You should be wary of unusual upgrades and unique designs. You also need to be sure that you can resell the property if you need to. If you aren't sure of the marketability of something you are adding to your property, call a local broker and remember that one person's treasure may turn off a potential buyer's lender.

Copyright 2006 #1 Loans USA

About the author:

Martin Lukac, represents #1 Loans USA http://www.1loansusa.com a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. For daily mortgage rates please visit http://www.RateEmpire.com

Written by: Martin Lukac

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