You’re out for a Sunday drive and see an open house sign. As you drive down the lane you see it’s a really odd shape, curious you decide to tour your first Geodesic Dome. To your surprise you’re taken by the spacious and airy interiors, the unusually shaped ceilings and rooms and just like that you’re in love with the unusual. If only your bank account was a little fuller!
Financing a Geodesic Dome, Berm home, or a log home and other types of non-traditional dwellings are financeable using a Fannie Mae and Freddie Mac investors.
Fannie Mae says that they are willing to finance homes of an unusual dwelling type based on the ability of the appraiser to comp it out and how it fits in the location and come up with a reasonable market value. Here is an excerpt from their manual:
Mortgages secured by unique or nontraditional types of housing, including, but not limited to, earth houses, geodesic domes, and log houses, are eligible for delivery to Fannie Mae provided the appraiser has adequate information to develop a reliable opinion of market value. It is not necessary for one or more of the comparable sales to be of the same design and appeal as the property that is being appraised, although appraisal accuracy is enhanced by using comparable sales that are the most similar to the subject property. On a case-by-case basis, both the appraiser and the underwriter must independently determine whether there is sufficient information available to develop a reliable opinion of market value. This will depend on the extent of the differences between the special or unique property and the more traditional types of houses in the neighborhood and the number of such properties that have already been sold in the neighborhood. – March 01, 2023 Selling Guide Fannie Mae
FHA/VA also have provisions for these types of unusual dwelling spaces, so long as they meet standards and the appraiser is able to validate the value adequately these properties are generally financeable, though many lenders won’t do them. The difficulty comes in that many private investors – the ones who are purchasing the loans that are underwritten to Fannie Mae and Freddie Mac standards often have overlays and they simply may not want a property that is unusual. In the event of a default, these are often harder to unload.
Financing mobile homes isn’t really mortgage financing
If you need a loan to purchase a mobile home either in a park setting or to park somewhere, it’s really more like a car loan. Yes, it is usually registered with the DMV and will have a VIN # just like your car! Accordingly, mortgage lenders don’t really lend on these things because it isn’t associated with Real Property. Your best bet is to visit your local credit union or regional bank. Rates and terms will be a consumer loan arrangement and it is a process more like buying a car than a house.
Getting loans on commercial properties doesn’t fall under the conventional, FHA/VA/USDA financing
Properties like that dreamy Bed and Breakfast or other live/work options are often considered commercial properties. If you’re going to live in the Bed and Breakfast and operate it, then this is a business purchase with Real Property included and might work well with an SBA type commercial loan, since it is business related. While you can finance up to 4 units in a building or on a lot, beyond that the property, even with dwelling units in it is considered a commercial property. Within the lending space there are many options for financing, though they aren’t the regular rates and terms that you might be accustomed to seeing should you be perusing regular home loan purchase products.
Cash flow usually matters on these and there are a variety of products available that will simply calculate the cashflow as the income source for the building, allow you to put roughly 20% or more down, with a solid credit score and some funds in reserve and send you to closing. Many mortgage brokers are able to offers these types of programs and the opportunities are numerous right now, having made a comeback after the loss of most of these types of products after the Great Recession.
Other properties – office buildings, hotels, golf courses, shopping centers, malls, general commercial buildings have a variety of options available depending on your financial situation, what entity is purchasing and what kind of cash flow can be expected from this. Even an owner occupied office with have some unique financing options. Fannie Mae and Freddie Mac do have loans for properties with more than 5 dwelling units. A commercial broker, lender or bank is a good source for these types of loans.
Working Farms, Ranches, Orchards, and properties with more than 10 acres are outside of regular single family housing financing
That nice farm, horse property or rural home on acreage is often best suited for a farm home type loan or through a local bank. It isn’t really commercial property, but it certainly doesn’t fall in the usual parameters of traditional residential lending boxes. A mortgage broker can assist you in learning what programs are available or if you bank with a regional bank or large credit union, they will likely have options for you.
Condo Hotels or Condotels are the latest trend in home, second home and investment options and there are good financing options
Condotels are usually fully furnished and appointment condominium properties found in notable hotels or country locations. Those who own them have access to all of the luxury amenities of the larger property project that might include, recreational facilities, concierge, fine dining, and full service spas. Just like a regular vacation home, it’s available whenever the owners choose to stay there. Unlike that regular vacation home, there is the option to put the property into the project’s rental program and sharing in revenue generated by the home. This allows the owners less hassle with maintenance, attracting renters, rental issues and other responsibilities that go with renting out a vacation home. While the financing programs for these don’t fit the regular menu, there are a number of Non – QM (non-qualified mortgage) programs that are available.
Common parameters might include:
- Loans from $150k- $1.5M
- May be primary, second home or investment
- Property usually needs to be at least 500 sq feet
- Unit must have at least one bedroom and a full kitchen
- Special qualifying on income using bank statements for income and even credit events just over one year may be acceptable
Buying land is a completely different situation for financing
The only way you might be able to finance a land purchase is as a part of a construction loan, a construction to permanent loan or a One Time Close loan. This allows you to close on property at the same time you are closing on the construction financing for the dwelling you will reside in. If you are using a government program, they have some limits on how much they will actually lend for the land itself. If you are above that amount, you may be expected to pay the difference out of pocket at closing. These are fairly complex types of loans to understand and do, they take longer than average and if you have a seller who wants their funds quickly on the land, you may need to get some kind of immediate loan unless you are ready with plans, specs, a builder and able to apply for permits right away.
In the event that you need a land loan, there are several ways to handle this. If you have equity in a home you are living in, taking out a 2nd mortgage or a Home Equity Line of Credit is a fast way to be able to access the cash to close on the lot. If not, a regional bank or credit union may be your best bet. Generally they will do lot loans on a fixed term and rate, or sometimes with a balloon payment in 3-5 years, giving you ample time to get your plans, specs, builder, and preliminary requirements out of the way. When you go to close on whatever type of construction loan, the lot value will be calculated into the total picture so that you are given credit for any equity you have at that point in time.
This probably doesn’t cover all of the unusual situations, so if you have a weirder one and you live in a West Coast state, please reach out. If not, look for a local mortgage broker that can assist you in discovering the options that might be available to assist you.
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