"Non-Traditional" Homes Hard To Refinance

Posted on March 22 By Justin McHood

If you have used certain types of materials to build or remodel your home, you may have a hard time getting traditional financing when it comes time to pay for it.

As the "green" movement gets bigger, many people are finding that using non traditional materials in the construction of their home can improve the homes "green" factor, but may also cause problems with the underwriting guidelines of some lenders.

Case in point: according to the Wall Street Journal, one family in Colorado used non-traditional materials for their home and have now "hit a brick wall" when it comes to financing.

The Hagars built their 2,700-square-foot house by stacking tire bales—five-foot-wide blocks of compressed tires—to form the exterior walls. They plugged gaps between the bales with cans, bottles, plastic plates, and other junk and moved in toward the end of 2008.

"We lovingly call it the trash house," Ms. Hagar says. The Hagars covered up all that trash with concrete, clay and stucco and installed south-facing windows to capture light, heat and views of the snowy slopes.

To pay for it, the Hagars in 2007 took out a $240,000 line of credit from Red Rocks Credit Union in suburban Denver. In the old days of easier credit, appraiser Lori Slota couldn't find another tire-bale home that had recently sold but said the house would be valued at $500,000 when complete, citing the listing of a straw-bale home as well as other houses in the area.

Last year, with the home finally finished and interest rates at record lows, the Hagars started trying to refinance into a long-term, fixed-rate mortgage. But in February 2009, they got the bad news from loan officer Bill Schimel, who wrote in an email, "I think we have really hit a brick wall here."

While it is true that getting financing for unusual homes has never been easy, with the credit crunch in full swing it is tougher than ever. Many lenders simply don't want to take the risk associated with these types of houses and because of the low demand as of now for products for these homes, there are just very few options out there... if any.

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