Monday, January 4, 2010

Cabin Financing Part I

Financing a second home is much like financing anything else. You need collateral, credit, ability to pay and a down payment in most cases. If your cabin is not your primary residence you may face slightly more scrutiny.
If you are building off the road system with no utilities, it is unlikely that you are going to get a 30 year conventional mortgage. You can, however, get a signature loan or a home equity loan on your primary residence or build the shell with cash and finish it as you have funds. With a dried-in shell you can at least start using it on a limited basis until you have the funds to finish. The danger here is that you can get mighty comfortable partially finished and never get it done but that is another story.
For a conventional construction loan, most lending institutions will want title to the building lot and a down payment. If you're an owner/builder, the bank will want a realistic schedule and a worksheet of the project with bids from sub-contractors for each phase of the work. Or a complete proposal from a General Contractor. You can save at least 25% by acting as your own General Contractor. We have guided many homeowners through the process.
We at FCC specialize in working with owner/builders. We do the design work, help you do your construction schedule worksheet and give you names of our sub contractors for the portion of the work you wish to sub out. Banks are more likely to loan to an owner/builder if they know they are working with a General Contractor for the first phase of the work. At least the bank will have a dried-in shell for collateral before anything can go too far wrong.
Next: Cabin Financing Part II

I have enough money to last me the rest of my life, unless I buy something.
Jackie Mason (1934 - )

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