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nunn_80
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# Posted: 6 Mar 2014 06:51pm
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Hi, I am trying to purchase a small cabin. The cabin has a water pump that supplies water to the house. I am having a hard time finding a mortgage company that will accept this water supply. Any advice would be appreciated.
Sarah
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MtnDon
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# Posted: 6 Mar 2014 07:32pm
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It might help to know what it is they don't like about it. What is the supply source? Well, pond, stream, cistern... ??????
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nunn_80
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# Posted: 6 Mar 2014 08:07pm
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Im being told mortgage guidelines need to have a public water source or well water, which seems strange. The current source is a creek that flows from the mountains behind the house. It seems like an environmentally friendly way to be able to shower, flush the toilet and do dishes.
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bldginsp
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# Posted: 6 Mar 2014 08:55pm - Edited by: bldginsp
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Is that creek an approved water source, according to the local health department? To have a legal residence here in California, you must have an approved septic and an approved water source. Banks here are reluctant to lend on a residence that is not legal. I'm thinking that if you got a letter from the local health dept. approving the water source for domestic supply, the bank might accept that. The bank won't listen to you, but they might listen to the local authorities.
In general it's hard to get a creek approved as a water source, because surface water is subject to contamination at any time. It might be clean today, then a deer does the unthinkable in the creek tomorrow. But perhaps the local health folk can help you make improvements to how you get the water from the creek to make it meet their standards, if it does not do so now.
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old243
Member
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# Posted: 6 Mar 2014 09:57pm
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Maybe the seller would take back your mortgage. old243
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wirivercabin
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# Posted: 7 Mar 2014 03:26pm - Edited by: wirivercabin
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Mortgage companies around here don't like cabins. They only want to finance homes. A friend was building shell (framed up only) cabins to sell. They stopped because nobody could get financing in the shell stage. They finished the 2 they had into homes.
They needed to find cash customers or had to carry the financing themselves and it wasn't something they had the $ to do.
So I am not surprised if anything is unconventional, you will have a hard time.
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dkay173
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# Posted: 7 Mar 2014 05:18pm
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We were also told that we would have a hard time getting a mortgage for our off the grid cabin so we refinanced our primary home, got cash out, and bought the cabin outright to avoid this problem.
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bldginsp
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# Posted: 7 Mar 2014 05:18pm
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Banks play it by strict statistics and by the numbers. They know, or think, that if the mortgage defaults and they have to sell it, they stand a far better chance of off-loading the property quickly and at a minimal loss if it is a permitted, approved residence.
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shadowcolt
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# Posted: 9 Mar 2014 04:49pm
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From advice from real estate broker, finance with a bank local to the cabin if possible, as they better understand the area and are more forgiving to the cabin lifestyle. It may still be difficult to get a conventional mortgage, but local banks in the area of the cabin will often finance in-house.
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SandyR
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# Posted: 10 Mar 2014 09:36am
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We financed through a Discover loan. It was fast and easy. Can you try doing this instead?
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richmondgolf
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# Posted: 10 Mar 2014 10:32am
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Our cabin did not qualify for a traditional mortgage given that it did not have running water or sewer/septic. We worked with a local bank who essentially provided a "land" loan. Rate was maybe 100bps higher than a normal conforming mortgage, but it was fixed rate. I think the only options we had were 10 year or 15 year and downpayment had to be 35% if land was unimproved or 25% if land was improved.
I struggled figuring out who would provide a loan on this type of off grid property, but was pleased when the local banks were willing to work with me. I definitely recommend looking to them for advice.
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TheWildMan
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# Posted: 10 Mar 2014 10:56am
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Have you considered owner financing, you pay mortgage payments to the seller directly and the seller gets the equivelent interest profits instead of a bank.
I was in your shoes a couple years ago, had credit score of 780, good income etc but lived in a high crime area and was having trouble with a couple drug dealers and gang members (essentially I asked them to turn the music down at 3 am and I ended up staggering home covered in my own blood). I was desperate to move to the country again and tried financing a dozen different camps, cabins and old farm houses.
if the place has anything less than ideal resale value that the bank could sell quick if you forclose then they refuse to finance. uncommon features that would only be interesting to a low number of people make a loan riskier as far as the bank is concerned. I was turned down due to dug wells, outhouses, wood based heat only, or off grid without available utilities. in the end I bought a tract of worthless swamp out of pocket and moved in to live in a crude campsite till I could build a cabin by hand with scraps, logs and salvage.
my advice is that most banks won't mortgage on a place with unusual utilities, the banks will only finance on them in a great economy (aka before the housing bubble burst and that huge mess with countless forclosures, banks are extra wary and cautious for mortgages these days).
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MtnDon
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# Posted: 10 Mar 2014 11:04am
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Seller financing: that is assuming the seller wants the potential hassles of being a lender.
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justincasei812
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# Posted: 10 Mar 2014 03:02pm
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When I financed my cabin I had to do it as a balloon mortgage and not a conventional mortgage. Due to it not having a "real" address since it is off grid. I do have propane heat, a well for water, but no electrical service or natural gas service. I would agree with trying to get a local bank to do the financing with or ask if there are other alternatives in financing.
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lawnjocky
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# Posted: 10 Mar 2014 11:48pm
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I think most mortgage companies are locked into the traditional home financing model which is dictated by the federal government throught agencies like FHA, Fannie Mae and Freddy Mac. Mortgage companies sell the loans as fast as they can write them so they have to comply with all the formalities the agencies require.
On the other hand a bank is in business to make all sorts of loans so they have more flexibility. The down side is that the traditional mortgage loan would probably have the lowest interest rate.
What might work is to go to the bank to finance the land only with you making a down payment. When the property is appraised the structure would get a zero value since it is non complying. You then have the seller carry the difference between the contract price and the bank loan and your down payment. The bank doesn't care if you have a second because the second lender doesn't get anything in a foreclosure until the bank gets everything it is entitled to.
When we purchased our home we ran into a similar situation. The home was built by a contractor as his personal home. The building was done with permits and finals. He then did an addition with permits but did not get a final. Then he built a 2000 sqft shop with permits and again didn't get a final. When the home was appraised everyone freaked out about the lack of final inspections. The seller had done a bunch of work on the shop beyond the scope of the permits that would need to come out to get the final and he did not want to do that in case the deal fell through. So what we did is get the house finaled and left the shop as it was. The appraiser gave what he though was a fair value on the house and a zero value on the shop. Since we had a large enough down payment no one cared because we met all the required ratios. The moral of the story is sometimes you have to get creative to make financing work.
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christian1
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# Posted: 11 Mar 2014 10:26pm
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I am struggling with this right now. Looking for more ideas if anyone has any. I have the green light from the wife if I can do it on my own without using the family money. I am looking at some pretty small places and less than $30k. Hope I will be able to find someone who will work with me or this dream will go on hold until I retire--or never
chris
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bldginsp
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# Posted: 12 Mar 2014 06:46pm
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I bought my property with seller financing, has worked out so far. Of course all that means is that I have made all the payments. Definitely get an attorney and make sure the contract you sign is good and protects you. You may need to convince a seller to go with seller financing. If you show them the payment schedule at 7% interest or whatever, you might attract them to the idea of getting a check from you every month for a long time. And, if you stop paying, they get the property back. Works out well for the seller on the short term and long term, only works for you on the long term.
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MtnDon
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# Posted: 12 Mar 2014 07:27pm
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Speculating on getting seller held financing is fine but may be a waste of energy. Many sellers of real estate want to sell to get the cash from the sale to buy something else. Financing the sale to someone else won't help them with that. Just saying don't be surprised if the seller does not want to finance the deal.
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bldginsp
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# Posted: 12 Mar 2014 09:12pm
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After the property has been for sale for years, and the only potential buyers dropped out because the banks won't lend on undeveloped land, a seller is sometimes motivated to look for alternatives. But, you can lead a horse to water....
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RichInTheUSA
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# Posted: 15 Mar 2014 09:30am
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best advice ever given to me: Save your money until you can afford to buy the things you want. #LiveDebtFree
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turkeyhunter
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# Posted: 15 Mar 2014 09:44am
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Quoting: RichInTheUSA best advice ever given to me: Save your money until you can afford to buy the things you want. #LiveDebtFree
I agree 100%......
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papawawesome
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# Posted: 11 Aug 2014 03:05am
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Agree as well. If it aint in my pocket or bank account, I cant really afford it. You might do a short term land contract though. Between you and the owner. That should keep the bank out of it.
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TheWildMan
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# Posted: 11 Aug 2014 06:11pm
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there may not be actual restrictions, I tried financing a dozen places before buying raw land (actually an old landfill) out of pocket and living camped out on it. the banks determine what they will and will not finance, they are not legally required to finance anything to you, financing is not a right. they look at it from an investment point of view and potential resale if it becomes forclosed. homes with a standardized water supply, heat, electric, etc. have a greater variety of people who would buy them from the bank after a forclosure so the bank would be taking less of a risk financing it. an uncommon utility source may be a turn off to many potential buyers, from the banks perspective its more of a risk and if you forclose they might be stuck with a hard to sell property. banks may make their lending policies strict to reduce their risk in this case. before the housing bubble burst they would have financed anything, but now they are like a turtle and only stick their head out on a mortgage if its perfect for them. the banks I dealt with cited it being state law against a mortgage on a cabin with only a woodstove for heat, a place with an outhouse, dug wells, etc. after going in circles I contacted the state capital and asked my representative about it. there was no law against it, but it was up to the bank to determine what they finance. citing state law is just a bank loan specialist denying a mortgage and trying to make it look like they weren't.
anyway my experience lead me to swear off banks forever, I bought my landfill out of pocket and camped for years as I built it into a working off grid with a cabin, everything paid out of pocket or with blood sweat and tears.
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toyota_mdt_tech
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# Posted: 12 Aug 2014 05:38pm - Edited by: toyota_mdt_tech
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Quoting: MtnDon Seller financing: that is assuming the seller wants the potential hassles of being a lender
I just picked up my neighborign 20 that way. He has been trying to sell it for 3 years now, no bites. He came to his lowest price, same thing he paid for it (I check with the county) and I said sold. I suspect he ran into people who wanted it, but no financing. So he was glad to take my offer of the same price he paid for it, 10K down, 1K per month, but set up at 500 per month. Interest was 8%. I'll pay it off so quick, he wont get too mucn interest from me.
So selling becoming the lender might be his only option to sell it. Banks are not lending on that land without a home.
So I was kind of in the driver seat.
My cabin on my front 20, I just saved and paid cash as I went along with my build. I already owned that 20 acres clear. So no banks involved at all.
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