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We have followed every detail and met it. Found a local mortgage broker, a local real estate lawyer, and local lender. We received our commitment letter. We also were approved through the VA. Our finances are in order and we are easily able to afford this property. The appraisal for the property was even more than what we agreed to purchase for! SO, long story short, we were supposed to close this week. All the paperwork was in the hands of the underwriter. Suddenly, our mortgage broker (who we have been working with for a month) seems confused and tells us he didn’t know that this was a log frame home. Then the lender tells us that the investor was going to sell the loan, but now will not finance because this is a LOG home! A $ 300,000, built in 1990, in perfect shape, LOG home. What’s the deal? Is it legal for the lender to do this after giving us a commitment letter? There is nothing wrong with the property, OR our finances. Please advise!
Additional info: The underwriter approved it. When it was presented to the investor, it was rejected.

3 Thoughts on Our commitment letter fell through, not due to our finances but that the property is log home. Is this legal?
  1. Reply
    February 13, 2014 at 2:25 am

    Its perfectly within the right of the underwriter to refuse the loan and withdraw the commitment letter.

    Financing for log homes can be a little more complicated than financing for regular homes. It is difficult for lenders to compare log homes to other houses in the neighborhood (to determine finished value), since log homes are still rare, especially in urban and suburban areas. The value of finished log home may be different than the value of the finished house of similar square footage. Lending institutions that are unfamiliar with log homes may have some reservations about financing them.

    Though log homes are not the same as regular homes, many banks are gaining more experience with them as they become more popular. Log home manufacturers are experienced with the log home business, and they may be able to direct you to banks that are supportive to financing log homes. There are some major lending institutions with programs designed specifically for log homes, so you may want to check several banks within your area to find out who has experience with them.

    Simply put the purchase on hold and find another lender that does Log Home financing.

  2. Reply
    February 13, 2014 at 3:03 am

    The commitment letter is not an absolute legal binding agreement, it has many conditions required within the agreement,

    The majority of loans are not keep in house with the original issuer of the loan, its sold in a secondary market to allow equity to follow into the bank/lender to do other deals

    if this lender does not believe your note can be sold on the secondary market because its a log home you will have to look toward other lenders, there should be a lender that specializes in these types of homes

    An resent article pointed out that many people who built home out of used tires, used plastic etc are finding they can not refinance because no lender wants to touch this type of home and there is no re-sale market for them

    I’m talking about very nice 500K homes whose foundation insulation is used materials, not a health problem just no secondary market for those type of loans after the crash

  3. Reply
    February 13, 2014 at 3:14 am

    This is considered a “unique” property and unfortunately trying to finance these is pretty tough. Just like dome homes, glass homes, etc. What happened is when the underwriter reviewed the appraisal it was probably noted in the report that this is a log home and underwriting had no choice but to deny the file. Someone really should have mentioned this to the loan officer in the beginning (your real estate agent should have known this would be an issue.)

    Try to contact builders of log home and see what financing companies their clients work with.

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