Before settling on any particular lender, interview several to learn whether they have experience issuing post-frame home mortgages, as well as construction loans. (Many financial institutions no longer offer residential construction loans as an after-effect of the 2007-08 financial crisis.) Furthermore, avoid lenders with separate residential construction and mortgage departments. “The mortgage department could give you a green light, while the construction loan officer may require a higher down payment or make other demands that can prevent you from moving forward,” Lierz explained. “It can be exhausting jumping through different hoops from two different departments within the same bank.”
One of the best things you can do to enhance your chances of getting the loan, Lierz said, “is to calculate, to the best of your ability, the entire cost of the project, from land, utilities, site work, framing and finish.” Going to a banker without a well-thought-out plan, he added, “is not a good idea because banks are not in the business to take on risk; they’re into security, and not knowing something is not safe for a bank.”
Similarly, equip your lender with your floor plan and elevation drawings. The more guesswork you can take away from their viewpoint, the more readily they can visualize your project and the more likely they’ll be friendlier toward your application.
Be prepared to fully articulate how much capital you plan to inject into the project. “Many clients will be vague and say, ‘as little as possible’,” Lierz said. “Much better to say: ‘I have this much capital, but I want to put in as little as possible.’ A banker will usually agree with the concept of ‘as little as possible,’ but they do have minimums.” Equally as important, be clear about how much of a monthly mortgage payment is good for your budget.
If you need a mortgage that accommodates a modest income, be sure that your lender is backed by Fannie Mae. While it doesn’t provide loans directly, Fannie Mae buys and guarantees them in what’s known as the secondary mortgage market, thereby making more mortgages available to low- and moderate-income earners. Banks that are eligible to be backed by Fannie Mae also must agree to not practice unethical subprime lending practices.
“Post-frame residential construction offers a homeowner great quality and value, and the demand for them is growing exponentially,” Lierz concluded. “But they are definitely different than conventionally built houses. Buyers seeking pole barn home financing will do best with a lender that understands the product and can relay that understanding to appraisers and underwriters.”