There’s a lot of attention being given to eco-friendly homes, ‘alternative’ homes and other dwellings that are not your average single-family home. You can find lots of information on the Internet, in books and magazines. However, one thing you might have a fair amount of trouble finding is an institution that will finance your alternative home venture, especially in today’s depressed economy. There have been a number of individuals who, when seeking financing, found that anything that wasn’t a standard ‘stick-built’ house was automatically in no-man’s land when it came to the ‘free mortgage market’.
For an interesting story of one couple’s search for financing, head over to greenhomebuilding.com/financial.htm and see what they tried before they found a financial institution (a local credit union) to loan them the money for their dome house. Despite the fact that ‘green’ homes are held up as the houses of the future, there still remain a sizeable amount of banks, credit unions and other lenders that won’t take risks on them.
Another stumbling block for alternative housing is that institutions want to see comparable home values. It’s kind of hard to produce comparables when you’re embarking upon an alternative housing project. However, this is another reason that lenders shy away from this kind of endeavor.
The three ‘musts’:
First of all, your credit has to be very good for a financial institution to even glance your way. Getting your credit up after a setback is not within the scope of this article, but there are plenty of ideas out there for you to explore. The better your credit is, the more likely your chances of a bank taking a second look at your proposal.
Second, have very clear plans about your building. It isn’t enough to say, “Oh this goes over here and we’re gonna put that over there.” You need blueprints, sources for your materials, qualified contractors (if you’re installing electrical and plumbing), and, if you’re not, explain what you’re going to do to heat and light the house. You also need to be extremely aware of municipal bylaws for dwellings as well as any standards you need to meet. Gather all the data you can on your house, comparable structures and the construction process.
Third, be aware of what insurance you need and how you’re going to obtain said insurance. Some companies do not cover homes that are not provided with conventional sources of heat and light or are made out of materials not covered by their standard policies.
There are lenders out there that finance alternative housing, but in the case that you can’t find one in your area or if all you can find is a lender who charges you an exorbitant amount of interest for a loan on an alternative dwelling, here are some ideas:
Try a local institution. Local credit unions and other lenders may be more flexible than the larger national and international banks. If they have strong roots in the community and take a personal interest in what’s happening around your town, they might be interested in financing an exciting new project that elicits strong interest from the public.
Search out other alternative home owners to get an idea of what their experience at valuation was like. If you can get valuations of any alternative housing, even if it’s not in your area, it’s at least something you can use to go on. Also, other alternative home owners may have contacts or ideas that you can use to find lenders.
Publicize your search for financing. Green is ‘in’ and many news outlets could find this a good story to cover. Lenders might feel better about investing in a ‘human interest story’ instead of (to them) some random person wanting to live in a hole in the ground.
Consider private lending. There are online resources, such as Prosper.com where you can post your story, provide potential investors your story and hope that enough decide to invest in your endeavor. Private lending is generally more expensive than a mortgage, but less expensive than most credit cards.
The fight to get alternative housing legitimized by the real estate and mortgage industry is an uphill battle. However, the more alternative dwellings built, the more voices will be raised for equality among home owners – whether that home is a conventional one or something a little different, a little greener and ultimately a little better for the Earth.