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It has been a while since I last gave you some tips on being your own contractor. Today, I will let you know some simple tricks of the trade for dealing with banks or mortgage firms. By the time you are ready to discuss your project with the bank, you will already have a full set of plans and an accurate price estimate and critical path. All of these things are absolutely necessary to have in place and for them to be accurate and complete. consider that the money you request and the time period in which you promise to complete the project will all be set in stone when you are done with the loan officer. Be sure you get the details right from the start or you will end up paying heavily in fees to reorganize the loan.

There is a common saying that the mortgage company “holds the key to your house.” Well, in fact they hold the whole darn house, not just the key. Whatever the scope of your project, if you get a loan for the construction of the home, you will most likely use the home itself as the collateral for the loan. That means if something goes wrong along the way and you cannot pay the mortgage, the home will go back to the bank and you will have to find somewhere else to live. Not a happy thought, but a truth that you must be aware of before you get started. Scare tactics aside, get your numbers straight. Make sure you have enough time in the loan to complete the house (realistic time frame from your critical path, not your hopes and dreams of a move in date). Know what you are signing!

The mortgage industry has changed dramatically in the last year. Most of this is as a result of failures in special loan programs offered by the banking industry which ultimately caused havoc and continues to damage the World economy to date. Banks were lending to people they probably should not have and were offering terms that quickly brought down much of the industry when things turned sour. Be sure you know what the fine print on your loan documents says. Be aware that pre-payment penalties, adjustable interest rates, and other fine line details can ruin what seems like a good mortgage just months down the road. Talk to your loan officer and ask as many questions as you possibly can. There are no stupid questions. The only thing “stupid” is signing a document you don’t fully understand.

When working with alternative construction techniques sucj as straw bale construction, the biggest roadblock will be the availability of comparable sales. These are homes in a designated area that have sold in recent months that fit the same description as your home. Things like the number of bedrooms and bathrooms, and the type of construction are used to make an assumption about the resale value of your home. This allows the banks to decide if the home is marketable should you default on the loan. The reality is, you will likely not find a bunch of straw bale homes that have recently sold ion your area. The reason for this is actually good news. People can;t find comparable sales because people who build straw bale homes, almost never move out! They are so loved, that they are not resold. This detail is actually helpful for you as you talk to your bank and/or appraiser. Make sure they know this fact. Also, let them know that any alternative house can be considered in the appraisal. This means log homes, earthen homes, and so on. That increases the pool of options they can look at.

Be sure to give your bank good details about the home without telling them more than they need to know. In other words, you don’t have to tell them that you will be using rice straw in the walls. Let them know your plans and give them detailed drawings that show you know what you are doing. Prove to them that you are on the ball and aware of all the stresses and hurdles that lie ahead. Show them you are ready and they will respond well. Keep in mind that as an owner builder, you will likely have to put down a larger deposit than if you hired a contractor to build your house, To the bank, you doing the work is actually a risk for them and so they make you pay more up front.

About the Author

Andrew Morison is a specialist in straw bale and green construction. He has shown thousands of peple how to build their own straw bale projects through his comprehensive series of instructional straw bale, concrete foundation, and plastering DVDs. You can chck these out at http://www.LearnStrawBale.com.com.

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