FOREWORD
In this article I deal with different financing possibilities that are available for log home builders and buyers. It is a modest start, but I will keep on adding information just as I am doing with every page in every category on this blog.
It might come as bit of a surprise for you, but I rank financial planning as the first step in designing that dream log home. Location comes as a close second, but that location article will have its turn later.
Biggest challenge here is to keep track of different financing possibilities on various markets. For example, in Finland it is possible to get normal housing loan if you are going to build your own house. In the U.S. it is more difficult and banks usually divide housing loans into builders’ loans and mortgages, therefore access for money depends whether there already is a building as a collateral or whether it exists only in the form of blueprints.
This article is going to be tediously long (some might say that it already has been…), I am planning to chop it into smaller pieces, but first I try to get the framework up. If you have anything to comment or you would like to share a resource, use comments.
INTRODUCTION
You have many ways to secure financing for your log house project. Most common choice is to acquire a bank loan. In a matter of fact, if a consumer wants to go through normal housing purchasing process, bank loans are basically the only choice. In this article I clarify especially the working principals of bank loans. Furthermore, I introduce few somewhat unorthodox methods of acquiring a log home. These methods have more to do with cutting the expenses or getting more income than financing itself. As a short summary to different financing methods: loans, cutting expenses and increasing income.
BUDGET
Why it is important to know the budget limitations for buying a log home?
Knowing our personal budget means that you know how much money you make, have and use. Knowing where you stand financially, gives you better control of the entire process of getting that dream log home. As a side product of good budget calculations, you will know where that extra 100 bucks goes every month. Personally I tried to find it behind the couch, but after snooping around for too long, I finally realized that my 100 bucks had magically morphed into those CDs and log home magazines that keep on popping up all around the house.
CALCULATING BUDGET
Budget is the magic word for any financial action. From budget you can see how much money you have at your disposal for buying the dream log home of your choice. Making budget is extremely time consuming work. One must know how much everyday living costs eat up and where the money comes from. Simplest way to have a budget is to pull out account balance statements and sum up income and expenditures from the previous year. This however doesn’t give the right picture yet, since from this calculation one cannot see, where the money went. Good budget also gives clear picture of different usages of money, not only the used amount, this way you can figure out, how much money goes to food, clothing, housing, car, utilities, hobbies, entertainment etc. As you know, how you spend money, you know whether there is any slack, from which you could benefit with a slight change in your living habits. Therefore, budget is the cornerstone for your decision making process on buying a log house.
BUILDERS BEST FRIEND - BANK
Now you have your rough budget ready and it is time to let the bank manager to know your financial situation. In theory, there are several financing methods that one could use to buy a log house. However, most of us just don’t have the high income or wealth that justifies us to use more creative ways of financing major acquisitions. This is why I will focus on mortgages as a way to finance log houses.
MORTGAGE
Mortgage is practically money in your pocket. Normally we don’t have… let’s say, 200 000 dollars lying around, but we can possibly earn that much during a long time period. Bank agrees to lend you that much money right now, in exchange to ownership of your house and interest for the loan. After you pay back the loan and interest, log home will be yours. In a sense, mortgage is a tool that is used to transfer the ownership of a log home over a long time period. When bank agrees to give you mortgage, you can go for shopping the log home you always wanted. After the final mortgage payment, log home will be completely yours.
Mortgage follows you for a long time, so you better understand what it means.
Getting pre-qualified for mortgage means that you have given your income, debt and credit information for the lender, so she can make rough estimations of what kind of log home you can afford. Pre-approved status takes you one step closer to realizing the log home project. At this stage lender has gotten your credit report and done some deeper debt-to-income analysis. When your lender pre-approves you, your coming log house is standing on more solid ground. Why is that? Because you know that you are very likely to get certain sum of money for your log home, when you apply for it. Bank tells you how much you can afford and how much they will lend you, you can go shopping different banks to see, if they offer better rates. Getting pre-approval makes things much easier whether you want to build a log home or buy one. You won’t waste time on looking for too expensive log houses or hesitating on borderlines and you can close the deal quickly when your dream log home is available.
