The Log Home Building Process

Choosing the log home producer is only the beginning in planning for your new log home. Who is going to build it? How much will it cost? And, where will you get mortgage and construction financing? These are just some of the questions that you will need to answer in the process of making your log home a reality.

The following information is provided as a basic outline of the steps needed.

Five Major Considerations in Building a Log Home

  • Budget
  • Land considerations
  • Design - deciding what you need, how it will work and what it will look like
  • Financing - finding both mortgage and construction money
  • Construction - do yourself, be your own general contractor, or hire a GC

Budget

The first step in basic research is to determine what you can afford, and the average cost per square foot for custom homes in the region where you plan to build. Your Jim Barna distributor can provide you with basic "rule of thumb" guidance, but there's no substitute for specifics. Since building costs vary, it is wise to consult several custom home builders - particularly if there are two or three experienced log builders in your area. That average cost gives you a guideline as to the size home you can afford.

There are a number of ways to cut costs, balancing your wish list with reality. Open floor plans with fewer hallways provide more usable living space; a simplified design with fewer corners also reduces cost. Careful consideration of utilities - having bathrooms stacked one above another, or back-to-back, reduces plumbing costs.

If you already own the land, one creative way to save is to clear the land yourself, saving rocks, timber, and other natural materials for landscaping.

Land Considerations

It is advisable to use a professional Realtor, so that hidden problems can be uncovered in advance. Further you'll want to ask:

  • Is land buildable?
  • Septic permit, percolation or soil evaluation tests, well or water source
  • Ingress and egress; encroachments and easements
  • Covenants or restrictions on size, building materials, style, etc.
  • Planned or proposed construction around property
  • View, privacy, convenience, location, etc.
  • Land should represent 15%-20% of total budget in most cases; mortgage companies tend to prefer smaller tracts over large acreage when the land will be financed with the home.

Design Considerations

When envisioning a dream home, most see the outside. But we live inside. Therefore, the residence should be designed, first of all, to function the way we want - to get the proper flow and to meet the needs of our family and lifestyle. That means designing from the inside out! Once designed for the way you live, we'll help ensure that your home looks the way you dreamed of from the outside.

To begin, make a prioritized list of the following:

  • Actual needs: Number of bedrooms, baths, floors, etc.
  • Priorities: Master suite, big kitchen, dining room, family room, porches, etc.
  • Foundation: slab, crawl space, basement, walk-out (adjust to site)
  • Placement of rooms: Children's bedrooms in relation to master, utilities
  • Amenities: garage, spa, mud room, etc.
  • Assign room sizes and space requirements for each room
  • Make sure the plan fits your lot, or that the lot fits your plan.

At this point, your Jim Barna Distributor can be immensely helpful in helping you maximize the livable space, suggest ideas to fit your lifestyle and needs, and ensure that your priorities are met within your budget.

Financing Your Log Home

Myths abound that log homes are more difficult to finance; the truth is, lenders tend to prefer what is most common, and shy away from the unconventional. That said, with thousands of log homes in existence today, financing has become easier than it may have been just a few years ago, with some lenders catering specifically to the log home market.

Jim Barna Financial is a log home lending specialist that combines construction financing with fully amortized permanent mortgage. Jim Barna Financial is licensed in Alabama, Virginia, Florida, Georgia, Kentucky, Missouri, North Carolina, South Carolina, and Tennessee. It will be, in the near future, licensed in Indiana, Illinois, Michigan and Ohio. Other states will continue to be added.

Mortgage Financing

Many banks and mortgage lenders have little experience in log home financing, as some feel that log homes are appreciably different from conventional construction so that the general financing guidelines exclude them. This is not the case. First, though, let's explain how mortgage financing works:

Nearly all mortgage lenders lend money according to a set of standards established by the Federal National Mortgage Association - abbreviated "Fannie Mae". Fannie Mae's guidelines for appraisal tell the appraiser to find three homes of similar style and construction that have been built and sold in the same area as the house in question within the last 12 months. The sale price of these would be compared to the proposed home to establish the home's market value. These homes are referred to as "comparables" or, shortened, "comps." This has at times been interpreted to mean that the appraiser has to find three log homes within a certain radius or county that have sold within the last year. That's nearly impossible in most areas, and would seem to make log homes un-financeable! Fannie Mae, though, sees log homes as being "rustic construction and style", just like a rustic wood frame home with cedar siding, as an example. Therefore, any rustic style home can be used as a comp. The appraiser or mortgage loan officer just needs to contact FNMA to get their clarification. A mortgage can then be issued, based on the appraised value of the home and property, the construction costs and the customer's credit and ability to repay the loan.

Jim Barna Log Homes can make available to you a list of mortgage companies that will issue mortgages on our homes nationally, provided that a General Contractor is used in the construction of the home. See your sales representative for details.

Construction Financing

The mortgage, or long term financing, will only be issued on an existing structure. A construction loan must be arranged to get the home built. Many banks can issue both types of loans, rolling them together into what are called "Convertible" or "Permanent" Construction loans.

In the event that your mortgage is coming from a different source than your construction loan, which can be written by a local bank, the mortgage company can issue an Irrevocable Letter of Credit, or L.C., to the bank guarantying that the construction loan will be paid off by the mortgage company upon completion of the home. The construction loan can then be written by the bank with the assurance that they will be repaid according to the terms of the L.C.

Construction loans are generally written as 90 day or 120 day notes. Funds are made available either at set intervals as different stages of construction are completed, called "draws", or as receipts are turned in as proof that work has been performed. Each bank will have its own method of payment and inspection.

Note: Most lenders will only loan money on homes that are constructed by professional builders or where a General Contractor is in control of the job.