Avalon Log Homes Summer 2012 Newsletter

Avalon summer 2012 newsletter

Questions to Ask Your Log Home Lender

10 Questions to Ask Your Log Home Lender

An insider gives you the advice you need regarding financing a log home.
by Doug Groff, American Home

Bank Finding that perfect piece of land on which to build your new home, choosing a log-home manufacturer and a builder, and designing a floor plan are all extremely important aspects of planning your dream home. Ensuring that you are working with a lender that can provide you with the proper financing is also a crucial part of the process.

 Following are the top 10 questions that you need to ask prospective lenders before committing to finance your new log home with one of them.

 1. Do you offer a “one-time-close” for my construction loan and permanent mortgage? Some lenders will require you to close on a construction loan before you break ground on your new home. At that time, you will be required to pay closing costs for that loan. Then, upon completion of your new home, they will require you to go to closing again on a permanent mortgage to pay off the construction loan. Upon closing on the permanent mortgage, you will be required to pay another set of closing costs for the permanent mortgage. This is called a “two-time-close” scenario. You may be able to save several thousand dollars in closing costs, however, if you can find a lender that offers a “one-time-close,” usually referred to as a “construction-to-permanent” (CTP) loan. This is a construction loan that automatically converts into a final end loan mortgage once the new home construction is complete. This method requires you to have only one loan closing, thus avoiding having to pay for two separate sets of closing costs. To get a CTP mortgage, you will need to fill out a loan application. The underwriter reviews the information and makes a decision about the approval of the loan. Upon approval, the lender will issue a commitment (approval) letter to officially state the loan’s closing conditions, which are the requirements for the loan to be approved. Standard closing conditions include an acceptable appraisal, title insurance, source of the funds needed to make the down payment and closing costs, signed contracts between you and your builder-contractor, and any applicable insurance policies (homeowners and flood).

 The appraisal is a very important part of the mortgage process. In order to initiate the appraisal, the lender will need a copy of the following items: Building Plans. The plans need to show dimension and elevation measurements for the new home. Preliminary plans can normally be submitted for appraisal purposes, as long as major changes to the footprint of the home are not made. For example, changing the square footage or adding or deleting rooms is considered a major change. Major changes can alter the home’s appraised value and can change the loan scenario.

 Specifications. The specifications are a listing of all of the building materials that will be used during the construction process. The specifications will be collected for the appraiser to assign proper value to the home. Because the quality and cost of materials can vary greatly, specs are an important part of the appraisal. Building Contract.

 The building contract is a binding agreement between you and your builder-contractor. This agreement lists the scope of the work to be completed and at what price.

Log Package Contract. This is a binding agreement between you and your log-home manufacturer that states the cost of the log package.

 Legal Description for the Building Lot. The legal description states the boundaries, dimensions, and size of the lot.

Title Insurance. A local title company or attorney in your area prepares and sends the title insurance to the lender. The title insurance insures you and the lender against any unknown liens that may exist against the lot. The timeline for the CTP loan is as follows: Initial Settlement. The lender sends the closing agent a set of closing instructions and closing documents, which tell the closing agent how the lender wants the closing documents to be executed. The closing agent reviews and executes the settlement documents with you. At this time, the seller of the building lot is paid in full and the lot transferred into your name (if you do not already own the lot prior to initial settlement). The documents are then recorded in the local courthouse. After initial settlement, the construction of the new home can begin.

Construction of Your New Home. During construction, money is disbursed to you and your builder-contractor to fund the building process through completion. Funds are disbursed according to a schedule. During construction, you will normally make interest-only payments to the lender on the funds as they are disbursed. A property inspection must be completed prior to the release of funds. The lender will have an inspector visit your lot prior to releasing each construction disbursement and the inspector will determine if work is progressing according to the disbursement schedule. When the inspection report is received, the lender will release funds based on the inspector’s assessment.

Interest Rates. There are normally two interest rates involved with a construction-to-permanent loan. They are:

 • Construction Rate. This is the rate at which you are making interest-only payments as funds are disbursed during construction. This rate is usually locked sometime between the loan application and initial settlement.

 • Permanent Rate. This is the rate of your actual end loan mortgage. This rate is locked sometime between loan application and the time at which your new home is completed. It is the long-term mortgage rate that is used to repay the funds that were borrowed as part of the construction loan.

 2. Do you require log-home comparables for the appraisal process? As mentioned before, the appraisal of your new home is a crucial step in the financing process. Your lender will require that the appraiser provide at least three comparable homes from which to derive the value of your new home. The appraiser finds comparables by searching the housing market around your new home for other homes of similar size that have been resold within the past 12 months. When financing a log home, many lenders will require exclusively log or timber-frame comparables for the appraisal. This can cause problems because there may not be any other log or timber-frame homes in the area where you are building. And if there are, they may not have been resold within the past 12 months. A lender that will accept conventional homes as comparables and not limit the search to only log or timber frames may make your financing process much smoother.

3. When will the lender pay for the log materials package? Most log-home manufacturers require payment for the entire materials package upon delivery to your building site. Many lenders, however, will not pay for the materials until they are attached to a foundation. Unless you can pay for the materials package with your own funds, it is in your best interest to find a lender who will pay for the log package prior to it actually being delivered to your building site.

 4. Can I use my loan to pay for my milling deposit to the manufacturer? Most log-home manufacturers will also require a deposit prior to milling your materials package. They want to make sure they have a solid commitment from you before they put forth the cost to cut your package. Again, many lenders will not pay for any part of the materials package until it is attached to the foundation. If you don’t have the funds to pay the deposit out of your pocket, make sure your lender can accommodate you by paying it out of your loan.

5. How long is the construction term of the loan? It is very important that you ask your builder-contractor how long it will take to have your new home completed. You then need to make sure that your lender offers a term that is long enough to allow your contractor a comfortable amount of time to finish construction. Construction terms vary from lender to lender. These terms can range from six months up to 24 months.

6. How much time do I have to lock my end loan mortgage rate? Your end loan mortgage rate is the rate at which you will be repaying your mortgage for the life of the loan. Some lenders will allow you the option to lock your end rate prior to your new home being complete. These lock terms normally range from 15 days up to one year.

 7. Does the lender have a builder-approval process? In addition to approving you for a loan, some lenders require that your builder go through an approval process as well. Your builder may have to submit her business financials to the lender to obtain approval to build your home. Some builders have no problem doing this, while others do not want to disclose their personal information to the lender. If your builder is uncomfortable releasing such information, it may benefit you to find a lender that does not have a builder-approval process.

 8. Does the lender have flexible disbursement schedules during construction? Each construction project is different, and each builder-contactor’s payment requirements vary as well. It is very important to ensure that your builder and lender will work well together. One very important aspect of the relationship between your builder and lender is the construction disbursement schedule. Some lenders have a set disbursement schedule from which they cannot deviate. This may cause a problem if the lender’s schedule does not meet the needs of your builder. Therefore, it may benefit you to find a lender who has flexible options. Some lenders offer an option that is referred to as a “staged” disbursement schedule. This type of schedule groups various aspects of the construction process into stages. When everything in each stage is complete, the lender will release the amount of money designated for that stage to your builder. Another option that some lenders offer is called a “line-item” disbursement schedule. A line-item schedule lists each aspect of the construction process individually and designates an amount for each. The builder can then request payment as each item is complete, rather than having to complete multiple items and waiting to be paid for all of them at the same time. Keep in mind that your lender will send an inspector out to your lot to make sure that the work has been completed prior to releasing any funds. Inspectors charge a fee each time they are asked to perform an inspection, and you normally pay that fee. So, the more inspections that must take place, the more inspection fees you will incur.

9. How many log homes have you financed? Log homes are unique, and so is their financing. It is to your advantage to choose a lender that is experienced in financing these types of homes. The entire process will be smoother. You don’t want your lender “practicing on you.”

 10. Can you provide me with testimonials from some of your past customers? You want to make sure that you are working with a lender that will provide the high quality of service that is required to get your dream home completed with minimal problems. Lenders that consistently exceed customer expectations should have no trouble providing numerous testimonials from their past customers. This is most likely the home that you have been dreaming about for years.

 Teaming up with a lender that can meet your needs will help ensure that your home-building process is as easy and painless as possible.

Idaho Homes

Avalon Custom Homes, division of Avalon Enterprises, builds conventional homes in the Treasure Valley in Idaho. For some of our Idaho Homes built in the Boise, Nampa, & Caldwell, Idaho area you can view custom home photos at http://www.box.net/shared/sb4ro5v44x



















For floor plans of these homes, please go to our site and see the Traditional Custom Plans at the bottom of our floor plans link at http://www.avalonloghomes.com/log-cabin-floor-plans

Avalon Log Homes Winter 2011 Newsletter

Avalon Log Homes Winter 2011 Newsletter

Lower Mortgage Rates for 2012

Mortgage interest rates dropped again last week from 3.99% to 3.94% on a 30-year mortgage. The rate on a fifteen year mortgage also decreased from 3.27% to 3.21%, the lowest in history. The economy is slowly rebounding with an increase in employment and mortgage applications have increased over the past few months. Does this signal an economic turn-around for 2012?

While the loss of jobs and problems with-in the lending industry have slowed homeownership over the last couple of years, the major financial players are forecasting cautious optimism for the New Year. “While the headwinds remain strong going into 2012, there are indications the economy and the housing market are gaining ground, albeit slowly,” said Frank Nothaft, Freddie Mac’s chief economist.”

In addition to low interest rates and a rise in the sale of existing homes, permits for single family housing construction have increased over the last several months, guaranteeing a positive influence on the economy at least until the summer of 2012.

Ready to start your New Year off in the home of your dreams? Contact Avalon Log Homes today!

Buying a Log Home is Essential to the American Dream

This week, an interesting set of surveys was published by Yahoo Real Estate, and they show a changing picture of Americans’ perception of homes and what constitutes separates a good house from a great house. The overarching theme? More and more, homeowners are coming to value ‘green’ characteristics in a home over plenty of other factors.

Just how much is that preference changing? Among all the choices for features that those surveyed looked for in a home, energy efficiency and being a environmentally friendly home topped all other options. Half of all those who participated listed these sorts of features and characteristics as being what they most looked for in a home. On top of that, more than a quarter of the people surveyed said finding a greener home was the primary motivation for trying to find a new place to live.

While more Americans are becoming concerned with environmental impact related to building a home, the primary focus still lands on finding a home that’s energy efficient. It’s plain to see why that’s so sought after, though, with millions of homeowners trying to find ways to save money on monthly bills. Often, there are also plenty of tax credits available as well, and that’s definitely enticing to new home builders.

Log Home Foundation Design

Before you go off and buy a log home kit, you need to know a few basics. The first decision that you will be faced with is the foundation of course. Should you build on piers, on a solid foundation, on stilts or should



you include a basement. Honestly I cannot make these decisions for you, but the lot that you are building on will give you your first hint. If you have a lot that has a decent slope to it and it is perfect for a basement, you might want to consider adding one. The why of this is that a basement is going to be the cheapest square footage that you can get and will add more resale value than almost any other choice you are going to make. (besides the kitchen and glamor bath) Typically a basement will cost you no more than twenty to thirty dollars per square foot, depending of course on the market that you live in. If you want a solid foundation and the lot is suited to a basement, the cost will not be much more than the solid foundation alone.
Then there is the pier or stilt method, this works well and cuts costs considerable, the downside to this is that the sub-floor is going to require extra insulation to keep your feet



toasty in the winter. Another drawback to these types of foundation is stability, when you leave an open air-space below your house, you are giving mother nature a toe hold on your house. Log homes are heavy, they need all the stability that they can get. In a storm or tornado (if these things bother you and are plentiful in your area) your house is more likely to shift if the wind can get under it. The biggest advantage of these foundations is cost. They are certainly cheaper and allow you to get to the meat of your project allot quicker. If cost is a deciding factor, you can always enclose the foundation at a later date. Another drawback to this type of foundation is the water and electrical lines. Of course you don't have to worry about your electrical lines freezing, but your water lines are five times more likely to freeze with an open foundation. There is heat tape that you can apply, but these products do die and they don't tell you when they die. If you decide to go this route be sure to check your anti-freeze systems every year before winter and monthly during winter. You will thank me later.

Another newer type of foundation on the market is the pre-cast panel system. These are great because they do not require a footing and can be installed in a day (in most cases). After your panels are set, the builder comes in and installs a termite shield and then the sill plate. Almost all pre-cast systems require that the sill plate lap at least four foot on to the next panel. This is what locks them together and keeps them from shifting. This is IMPORTANT, if your builder neglects to do this properly, your foundation can shift when back-filled and the warranty will be voided. This is not easy to fix because the way the system works you cannot back-fill until the sub-floor is on. You will not discover the problem until it becomes a very expensive process. Keep an eye on your builder during this process. I once knew a very capable builder who was installing the sill plate when the homeowner discovered that his men hadn't followed the instructions. The builder was more than willing to fix the problem, but the homeowner ran him off the project. His theory was that if the builder was going to screw up this soon in the project, what other directions would he miss. Who can blame the guy, certainly not me. After your sub-floor is installed, you can pour the basement floor and lock in the walls permanently, then and only then can you backfill.
Now for the newest type of foundation to hit the building world. (not really that new, but new to most consumers, its been around for at least ten years) The hollow foam block. These blocks are made of styrofoam (much

like a cheap beer cooler) which interlock and are stacked very quickly. During the stacking process a series of reinforcement bars are installed along with plastic spreader pieces. (the plastic pieces prevent the blocks from spreading when they are filled with concrete.) While stacking the blocks, all of the openings are formed out, as a result these form boards become permanent bucks for your windows and doors. It is best to use pressure treated material for the bucks. Once everything is in place and a few kickers (which keep everything from shifting) are installed, it is time to pour the concrete. This is best done with a pump truck or a conveyor truck as trying to pour this much concrete with wheelbarrows and buckets is just stupid. The concrete could set up in the bottom of the forms and cause you to have cold joints. ( the reason I said anything about the how of this is because homeowners are notorious for trying to cheap out when it is important not to) Yes, your foundation will stay together even with cold joints and no one will ever see them, but it makes for a weak wall and is not recommended.

Whatever type of foundation that you choose, all of them will need a termite shield on top of them before the sill plate is installed. A termite shield is just a fancy name for a continuous aluminum sheet (aluminum flashing comes in rolls from ten inches to two feet wide) at least two inches wider than the top of the foundation. Flush this material with the outside of the wall and let it hang over on the inside. The theory behind this is that termites cannot walk over the slick aluminum preventing them from building a tunnel up the inside of the wall up to the sub-floor. Do not neglect this process, some builders swear that because of the chemicals used to protect the house that it is no longer needed. This may be true, but what if you forget to call your pest control guy one year. Wouldn't you rather have a cheap back-up instead of having no protection? This is not a costly procedure and can save your home in the long run. Do not let your contractor or anyone else talk you out of this step.

When building the foundation you will need some sort of method to attach the sill plate. (sill plates are almost always pressure treated two by eights) In the case of the pre-cast concrete panels, they leave holes every sixteen inches to two feet for you to bolt the sill plate on. Use every hole and the hardware provided as it will be rated for this application, this is extremely important when using this type of system and it could void your warranty if you don't. In some areas, such as coastal plains, your local codes will dictate how you must attach your sill plate. I built a log home on St. Johns Island outside of Charleston S.C. a few years back and their codes are as strict as anywhere in the nation. According to their code, from footing to ridge beam everything had to be attached using a variety of clips, fasteners and straps. Coming out of the footing and through the block foundation was a continuous strap that flattened out on top of the block and then was folded back over each side of the sill plate. This is extreme, but that house will never move.
The most common fastener for sill plates is the eight inch anchor bolt with a three-eighths inch threaded nut and washer. These bolts are shaped like an L and are usually put in the wet concrete about every two feet or



as required by your local codes. (keep in mind when you are installing your bolts that wherever one board ends you want two bolts so that the end of one isn't just laying there, this is especially true at the corners of the wall where you may need as many as three bolts, lay out where your boards are going on top of the wall to better plan for bolt placement) When you install your termite shield, just lay it out on top of the bolts and working from right to left, hit the flashing lightly with a wooden headed hammer on top of the anchor bolt, this will knock a hole in the flashing where you need it then you can drive the metal down flat on each side of the bolt. Be careful not to damage the threads on your anchor bolts, if you want to play it safe, put a nut on the bolt before you hit the metal and after you have a hole in the flashing lift it up and take the bolt off, this will straighten any threads that you may have damaged. Once you have the flashing on, you can bolt down the sill plate. Work from right to left and measure each bolt from the end of where you are starting. Make a straight line across the board with a speed square and then measure how far the bolt is from the outside edge. (when installing the bolts, it is best to stagger them alternating in and out while making sure the leg on the bottom of the bolt is covered well) Pre-drill each hole using a bit that is no more than one-eighth inch larger than the bolts diameter. Once the board is in place (you may have to work the board back and forth while hitting it with a two pound hammer) place the washers and finally the bolts. Tighten until the wood starts to compress, making sure not to over-tighten as you can pull the anchor bolt right out of the concrete. (allow the concrete around the bolts to cure at least thirty-six hours before applying stress)

If you have chosen a block foundation that you do not plan on pouring solid with concrete, you can stuff the cells where your anchor bolts are going with the left over mortar bags. If you will pre-plan and layout where your floor joists are going on top of the wall, you can place your anchor bolts in such a way that they do not interfere with the joists. You do not want to have to notch your floor joists before you even get started good.( if you neglected to pre-plan your bolt placement, you can always counter-sink the nuts and cut the top of the bolt off with a sawz-all) Most log homes have a double rim joist ( I like to call it a boxing band, that is the board that borders the outside of your sub-floor framing and your joists will be attached to it) This means that your anchor bolts must be at least three and a half inches in from the outside of your wall. ( I realize that this does not allow for much staggering of the bolts, but whatever stagger you can get will be better than having them in a straight line) Technically all of the pressure on a sill plate is down pressure which means there is no lateral force on the plate. This means that bolting the plate down only fastens the structure to the foundation and typically the weight of the house would hold it in place. However, during a freak wind event, there can be strong lateral forces on these bolts. These bolts also help keep the boxing band (rim joist) still while the builder is working on the sub-floor. So, even though they are not totally necessary, you wont catch me building a house without them. (I hope that makes some kind of sense to someone)
Another consideration when planning the foundation is it's final appearance. If you are planning on using stone or river rock for the exterior finish of your basement then the foundation must be left back the

thickness of your material to look right. Typically you will find that most log homes have stone covering the block foundation. Try to stay away from anything thicker than two inches as this is almost the limit of set-back that you can get due to how the first log course much be attached to the sub-floor. (this is why there is a double boxing band or rim joist) You have an unlimited selection of materials to choose from when covering a foundation. One of the cheapest methods (versus painting the block) is to stucco the exterior wall, (natural stucco is just two or three layers of colored portland cement, synthetic stucco is an expensive material that must be purchased be a licensed professional) the advantage of stucco is that no set-back is required making pre-planning a little easier. The biggest drawback to stucco is that if your builder doesn't use a good bonding agent or it is applied at too cold of a temperature, the material can flake off leaving your wall looking like a dalmatian.

Then there is brick, honestly I don't think brick belongs anywhere near a log home, (that is a personal opinion) brick offers the same challenges as stone as you will need to set the foundation wall back to allow for the brick. There is also a product which is face brick which is only about five-eighths of an inch thick and goes on much quicker than standard brick. With this material you will also need to set the wall back to allow for the difference in thickness. Whatever the choice even if it is fake brick (stucco applied to one-half inch thick and then mortar lines scratched out to resemble brick) the challenges are certainly the same and must be accounted for before you begin construction. If your contractor has half a clue about what he is doing, this will be as easy as pie for him. A novice will screw it up and have your brick, stone etc. sticking out well beyond the face of your logs. This will look like (insert your choice of expletives here) and the cost to fix it will be astronomical. So, do it right from the start. The bad thing about making a mistake in the foundation is that it compounds itself throughout the building process. A quarter of an inch out at the bottom can turn into three inches at the top.
Decks, porches, stairs or any other exterior attachment that will eventually be attached to your home at the sub-floor must be planned for now. Wherever you plan on putting a deck etc. plan on using a pressure treated



board for your outside boxing band (rim joist.) Even though you will install a vapor barrier and a piece of aluminum flashing to protect your sub-floor, use a pressure treated rim joist at all of these areas. When you eventually build your deck etc. make sure to bolt it to the rim joist with lag bolts at least every two feet and preferably every sixteen inches (through bolting is even more efficient but requires more work), making sure that the bolts (these bolts should be at least three-eighths in diameter but no more than five-eighths) will penetrate through all three layers of the rim joist. (in most areas of the country this is code due to the many deaths and injuries from decks failing during parties or other unexpected load events) You especially want to use these methods if the deck or stair is not covered by a roof (technically a deck with a roof is a porch) even though you will probably slope the deck away from the house, water tends to get in places where we don't want it. More often than not this area of the boxing band will rot out if not planned for in advance making the attachment unstable and unsafe for you and your family. You can prevent this before you even start if you know what to look for and how to solve the problem. I have heard a many old man say, "I will be dead and gone before this roof leaks or that wood rots" This is not fair to whoever inherits your property after you even if you plan on selling the property or are building it for spec. Of course the decision is ultimately yours, but wouldn't you rather have more selling points than possible faults in your project? (who knows, the buyer may have read this article to) I know you will make the right decision for your situation.

Visit us at http://www.avalonloghomes.com or email us at logs@cableone.net