Financing your dream Log Cabin

When estimating cost of a log home, cost per square foot is completely subjective. Log Homes can be built to any standard of finish, but by nature, log homes are rarely starter homes and they tend to not be cheaply finished. Frequently log homes are the last home people ever intend to build. Log homes tend to be built on a special piece of property, often land that has been in a family for generations, or a special place on the family farm or ranch, a long-dreamed of retirement, or a favorite vacation destination.

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FINANCE YOUR DREAM HERE’S HOW TO GET A HANDLE ON THE MONEY GAME WHEN BUILDING YOUR HOUSE.

It is the nature of custom homes to have custom prices dependent on selection of materials and special trade skills required to finish the home. Log homes typically employ a far greater range of interior finishing material options than conventional construction. These include specialty finishing lumbers, tree stocks, round beams, joists, and ridge. These members can be either structural or decorative, with different costs. Design is a huge factor in cost, and not only the total size and square footage plus the complexity of the design, but also the decorative elements of the structure that are driven by esthetics.

D

REAMING ABOUT THE PERFECT HOME is easy when everything resides on paper.

Once you get a little more serious, the tough decisions begin to take shape—and you have to be realistic about how much home you can afford. Most lenders will evaluate your income against your monthly expenses to determine how much you can spend. Then they’ll provide you with a pre-qualification letter, which you can use as leverage when shopping for your home. But how do you find the right lender?

Ask candidates the following questions to help you choose the right one for you.

1

Do you provide construction-to-permanent financing?

Make sure to ask if there’s a single closing for both or if you’ll have to close on each separately. (Hint: The former will save you money on closing costs.)

2

Have you financed log homes before? Though not necessary, it’s helpful to use a lender who’s familiar with log-home construction.

3

How far in advance can I lock in my interest rate? A longer lock-in period gives you more flexibility when scheduling the start of construction.

4

Does your appraiser use only log home comparables, or does he look at the custom-home market in general? The latter is preferred.

5

Do you release funds through a draw schedule (payments made at intervals as work is completed) or on the presentation of invoices?

Keep in mind log home companies may have requirements.

6

Do you allow a homeowner to convert to permanent financing before a house is fully completed? If not, be sure to find out the requirements for obtaining a use-and-occupancy permit.

FAR LEFT: Masonry fireplaces are a major expense on many log homes. Owners can chose from among a wide spectrum of costs and construction methods, from lightweight faux stone to full natural rock fireplaces which can even be on multiple levels of the home and include both interior and exterior fireplaces. Depending on materials chosen for construction, fireplaces can also be a significant consideration in foundation construction and costs due reinforcement necessary to support extra weight.

LEFT: This homeowner elected to sheath their chimney in weather resistant cedar, a far less expensive alternative to masonry.

CALCULATE YOUR BUDGET To determine how much money a company will lend you for a home, lenders use what are called borrower-qualification ratios. These are based on your income and expenses. A lender can qualify you based on a percentage of your monthly income allowing for housing only (28 percent), or housing plus recurring debt (36 percent). Under generally accepted guidelines, lenders use the more restrictive of the two.

To find out roughly how much you’re qualified to borrow, complete the following worksheet.

1. Determine gross monthly income Salaries Dividends Commissions Social Security Retirement funds, pensions, etc.

Other Subtotal (Line A) 2. Determine total monthly expenses Auto loans Credit card payments Other long-term loans Other personal debt (Don’t include loans that will be paid off in 10 months or less.)

Subtotal (Line B) 3. Subtract total expenses from monthly income (Line A - Line B)

4. Multiply net monthly income by 0.28 (equals maximum monthly mortgage payment under housing-only method) Or multiply net monthly income by 0.36 (equals maximum monthly mortgage payment under housing-plus-debt method)

5. Determine the maximum amount you can borrow by matching these figures against the current amortization table on loghomeliving.com.

To be conservative, use the lower of the two monthly payment figures you calculated. In no case should your payment exceed the higher of the two numbers.

6. Determine your total project budget by adding the loan amount to your estimated down payment.

(Note: This figure must include any outstanding balance owed on your land.)

Land costs are a huge determining factor in log home cost. Even when the land is not located in a resort area, location determines the ultimate cost of any home.

Factors include expenses directly related to the house, such as the type foundation local conditions dictate. Even on a single property, cost can be heavily affected by how the house is sited, especially if some orientations interact with property slope differently.

THE PRICE TAG

FIGURING OUT YOUR HOME’S BOTTOM LINE REQUIRES AN UNDERSTANDING OF 5 IMPORTANT FACTORS. How much does a log home cost? We hear that question all the time. For hopeful homeowners, unfortunately, the answer is anticlimactic and even less helpful: “It depends.”

How on earth do you build a budget around that? You can’t.

There isn’t a definitive answer. It’s a function of the design and location of the home. What you can do, though, is understand the variables that go into building a home so you can quantify the cost of your project yourself.

The primary variables that will influence the price tag on any log home are size, complexity, level of finishes and where you build. So when you’re calculating your budget, consider these factors before anything else.

1

SIZE

The impact of square footage on the cost of a home is straightfor-

ward. The bigger the house, the more building materials that go into it, the more expensive it will be. Simple as that.

2

COMPLEXITY

A home’s design may be the least understood factor impacting cost. More complex designs with multiple corners and ridgelines may require a bigger budget. For those looking to lower cost per square foot, stick to a simpler rectangular design with one roof ridgeline.

3

FINISHES

The little things can mean a lot.

The level of finishes you choose can have a significant impact on your overall budget. Obviously, the highend options cost more, so invest in the amenities that mean the most to you (granite countertops, whirlpool tubs, wide-plank flooring).

4

LOCATION

5

SITE

Where a home is built plays an enormous role in its cost. The same house built in two different locations could come with two very different price tags. The difference in the cost of materials might be negligible, but local market conditions can drive up significantly how much you pay for land and labor.

In addition to geographical location, the specific parcel of land you stake your claim on will influence how much you’re going to pay.

A difficult site that’s steep or rocky affects turnkey budget. If your land is perched on cliff above a lake, it will be a dramatic home site, but more expensive to build on than a piece of flat ground. The flatter the land, the easier—and therefore less costly—it is to build.

Copyright © 2015 Cruz Bay Publishing, Inc., El Segundo, CA. This publication may not be reproduced, either in whole or part, in any form without written permission from the publisher.

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