Financing a Straw Bale Home
Perhaps the most commonly asked question about straw bale construction is: "How do I finance it?" Unfortunately, the answer hasn't gotten much easier over the years as straw bale construction is still considered alternative to the mainstream and, as we all know, banks are not big fans of taking risks on alternative construction techniques. That said, there are some things that you can do to improve your efforts and increase your chance of receiving funding.
Have a quality plan. Knowing that banks often think that straw bale houses are "weird," it is very important that we don't perpetuate that belief. If you show up to the bank with what appears to be a quickly thrown together sketch, or with little to no pre planning in hand, they will likely jump right to that conclusion. Have a professionally drafted set of construction drawings that clearly lay our your home and show the bank that you mean business. This plan will easily pay for itself as the job moves forward too as well planned homes are always more likely to stay on budget and on time.
Know what you are asking for. Get some quotes from local builders so that you know what to expect in terms of home construction costs. Sit down and say something like: "I need a loan for $200,000 of construction costs plus a 15% contingency fund." That will sound much more professional than "I'm not really sure what it will cost...what do you think I need?"
Use the right language. If you find that the first few banks you speak with are not open to the idea of a straw bale house, then change your approach. Talk to the bank about financing your post and beam home. Bring the cellulose insulation into the equation a little later on. Don't wait too long though as you don't want to waste your time or theirs.
Talk about comparable sales. A big sticking point is often the ability )or lack thereof) of the appraiser to find homes of comparable value due to the fact that there are not as many bale homes on the market and they want to compare apples to apples as much as possible. Let the bank and the appraiser know that the reason there are not a lot of second hand sales of bale homes is that the owners value them so highly that they do not often sell them. This is an asset, not a hinderance.
Have a reasonable down payment. Don't expect to get the loan with nothing down. This used to be possible, but is not the norm these days. If you have a large (in the bank's opinion) chunk of money invested in the project, the bank will feel more comfortable. It's not easy to walk away from tens of thousands of dollars, and the bank knows that.
Owner builders are hard to finance. If you plan to build the house yourself, try to find a contractor that will sign on as your paper contractor. He or she will be on the paperwork and that will make the bank feel much more comfortable. You will have to pay the contractor for this service, but if it is the deal maker or breaker, then it is worth the money. Just roll that cost into the loan.
Be persistent in your search and remember that the upcoming 2015 International Residential Code (IRC) has a straw bale section in it. This will help with many things like permitting, financing and insurance. Take advantage of that and bring it to the bank. Show them that this is not some hair brained idea, but a nationally accepted form of construction.
-Andrew Morrison