For those looking to buy or refinance an energy efficient home know there are problems with berm home financing. You have great credit and a great job but still get turned down for a loan. If this sounds familiar then, you need creative berm home financing.
Why You Need To Get Creative
Berm houses are unique. These types of houses are typically built anywhere from slightly above grade to/or partially below ground level, with earth covering up to three side walls leaving only the front of the house exposed to natural light. This type of building design allows for adequate ventilation and passive solar to significantly reduce heating and cooling costs. This type of construction also helps protect from natural disasters.
Getting approved for a berm home mortgage or financing can be difficult. Unique properties like dome homes and log homes are just as difficult. Because earth sheltered homes are unique, approval will require you to be creative.
Why Creative Berm Home Financing Is Needed?
A Berm home is also called an earth-sheltered house or earth berm home. This type of home is energy efficiency and disaster resistance. Many homeowners find them an attractive home option. But, even if desirable, most lenders won’t approve Berm home loans because of problems during appraisals.
A lack of similar homes that have sold in the last 12 months make the appraisal process hard. Lenders are more confident when an appraiser can find similar homes that have sold in the last 12 months. Finding three or more Berm homes in a single area is nearly impossible.
Why Lenders Deny Financing Berm Homes?
Once you get beyond the appraisal issue, another real problem for many lenders is that lenders fear that unique homes like berms are hard to sell because not many want to buy them. This makes lenders nervous if they ever have to foreclose on a home. Selling a home fast is important to keeping foreclosure costs for a lender to a minimum.
A Creative Approach To Financing
If you want to buy or refinance a non-conventional home like a log home, berm home (sometimes called an earth home), or geodesic dome home, you’re probably going to be denied by most lenders, but don’t give up. It is possible to find berm home financing – a creative approach is the key!
You can approach your bank or credit union for help but most of the time they won’t fund a mortgage for a unique home for the reasons already mentioned above. But, if they do provide mortgages for unique homes, the interest rate will often be higher and usually the mortgage will be an adjustable rate mortgage which has the risk of a higher mortgage payment in the future.
Problems With Hard Money Lending
“Hard Money” lending is another option you can try. A Hard Money lender is a non-bank mortgage lender that can approve loans on unique properties. The problem with Hard Money lenders is that their interest rates are even higher than banks and credit unions. Plus, you need to watch out for the fine print buried in dozens of pages of mortgage documents. Hard Money lenders are notorious for non-standard mortgage documents that can trap you in a mortgage that will not be affordable for the long term. The fine print may include a balloon payment where the entire mortgage balance has to be paid off in just a few years after you get the loan.
Creative Financing With HomePromise Corporation
To sum up, most lenders will always be nervous about berm home lending because unique homes are not common. But, lenders like HomePromise will look at creative ways to ensure you get the mortgage you need to buy or refinance the dome home, berm home or log home of your dreams and you can be confident the mortgage you get won’t hurt you in the long run.