Often seeking log home financing is the only way to make your cabin a reality. Though the face of lending has changed a lot over the years, there is still one factor that never changes– that banks like to make interest money on solid loans. We do not finance log home personally. But here are some tips we can share with you based on our experience.

One key factor to remember when building a log home or other project:

Have your log home financing in place before you break ground!

There was a log home builder that we knew when we lived back east. He started on a big cabin for his personal home. He paid cash for the land, cash for his log home package, cash for the foundation work, and cash to dryin the home. Then he realized that he needed some more funds to finish the house. Nothing was financed at all against the property, but the bank would not loan him any funds. The bank said that there was no way for them to verify that all of the contractors had been paid to date, so it was took risky for them to loan on the property. In the end the builder had to take a loan out on a rental property he owned and use that to finish his personal home.

Now for some tips~

Tip #1

It is a good idea to go into a bank and talk with the lending agent. Tell him up front that you want to build a log home and see what his or her response is. Some banks are just fine with log homes. Others are not comfortable handling them. So check it out first. Ask them, “Do you provide a construction loan on a log home?” Also ask the banker if they have written a log home loan in the recent past. From our experience it is almost a strike against your home from the beginning if the bank is not familiar with log homes.

Tip #2

Present your entire project to the bank. If you are planning to put some or a lot of cash into the project (as our builder friend did) show that to the bank. Another customer of ours a few years ago was wanting to build a 2,300 square foot log home with a two car attached log garage. He had $100,000 in his pocket. He needed another $375,000 for the entire project. The bank offered him a loan for the $475,000.  Once the building started he spent his cash first and then financed the rest.

Tip #3

Sometimes smaller banks work harder for you. This has been our experience. The best little bank I think we ever dealt with was Ruby Valley Bank in Sheridan, Montana. They only handle construction loans in Montana, but they were wonderful to deal with. For our construction loan for a log cabin kit in Ennis Montana, a few years ago, they gave us a checking account and let us draw funds as needed. Some banks only release funds on a monthly basis, which is OK, but having the check book was so handy. Then every few weeks I turned the receipts into the bank.

Tip#4

With construction loans remember there is a time limit. Most banks only allow between 6 and 12 months for the complete project.

Tip#5

Sometimes when you are building a log home yourself it is hard to get a loan on it. One option we used was to finance the land. Then we took the next 2 1/2 years to build our log home ourselves with cash and a personal loan. Then we refinanced the house and land together. Loans on land tend to be higher than loans on a standard mortgage. Also we were not under a time line of the 6 to 12 month window.

Planning ahead and making a budget, seeking financing, and making an entire game plan for your home– before you break ground– is very important, regardless of whether you are building a small cabin or a large log home. You don’t want to see you project derailed after you start. Where ever you seek financing, don’t be discouraged if the first bank is not very in tune with log homes. It may take two or three before you locate one that is familiar with log home financing.

Cowboy Log Homes