for Dome Homes

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The following information was written by Michael Darling. 

Dear dome home owners, buyers and builders:

Because I have seen designs for dome homes that are superior to other construction and design styles, and I’m always willing to go above and beyond when there is a reason. I have been researching the mortgage lending sources for dome homes. There is good news; there are more lenders who will lend on domes than on other “unique properties. There is bad news – it is still more difficult to get a loan for a dome home than for traditional construction. And there is good reason for hope for improvement in the near future.

I contacted every lender I could find, though I do not claim to have spoken with every lender in the USA. And while I would not claim to have done an exhaustive study, I am confident that I have as complete a picture as anyone of which lenders will finance domes and under what circumstances. I will continue to research the subject and will send updates from time to time. If you provide me with your specific mortgage objective, I will notify you when I find a loan that matches.

Three Scenarios for Financing a Dome Home

Leaving aside for the moment the differences between construction, purchase and refinance there are three scenarios to focus on when it comes to financing a dome home. All three are based on an appraisal from a licensed appraiser (it can be really helpful to have a more experienced appraiser - more on appraisals below).

• There are three or more comparable properties (comps) of similar design and construction style (dome) with recent sales history in the neighborhood.
• There is at least one comparable property of similar design and construction style with recent sales history in the area and others in the area but without recent sales history.
• There are zero comparable properties of similar design and construction style in the neighborhood.

1. Three or More Comps

I have never failed to find a loan for a dome with three or more comps. Many residential mortgage lenders will be able to do this loan much the same as a traditional loan on a traditional home design. There are lenders who flat out reject domes no matter what, but for the lenders who will consider domes, a property with multiple comparisons should be “lendable”. Even with multiple comps, some lenders who will accept domes may only offer a loan with constraints on the size of loan, the loan to value ratio or other underwriting restrictions. (Full doc only, owner occupied only, one unit only, etc.)

2. At Least One Comp and Other Domes in the Market Area

There are a few residential mortgage lenders who will evaluate this situation and may make a loan. Here is where it can really help to have an experienced appraiser who knows the market because the ability of the appraiser to establish a market value and address the uniqueness of the subject property will be vital to an underwriter. Most lenders who will accept domes in this situation will only offer a loan with constraints on the size of loan, the loan to value ratio or other underwriting requirements. (Full doc only, owner occupied only, one unit only, etc.)

3. No Comps and No Domes in the Market Area

I have found traditional residential mortgage lenders in a few states who will evaluate a dome home with no dome comps on a case by case basis. A lender that would accept a dome in this case will almost certainly include constraints on the size of loan, the loan to value ratio and other underwriting requirements. (Full doc only, owner occupied only, one unit only, etc.)

There are local commercial banks who may offer a residential mortgage loan on a dome home with no dome comps. And there are “hard money” lenders who will evaluate any investment opportunity and who may make loans on dome homes- but compared to a traditional mortgage the fees and rates will likely be higher, the terms shorter and the conditions less advantageous.

If the property has an established or demonstrable commercial use it is possible to do a commercial loan with terms and conditions similar to a residential mortgage. The commercial lenders I work with have no restrictions on domes specifically nor will they be concerned about comps with similar construction styles. They will be looking for an appraisal that demonstrates the commercial value of the property. Bed & Breakfast Inn, multi-family rental, retail business, and other exclusive or mixed commercial uses would all be possibilities. (A home office or a business run from home would not generally be enough to demonstrate commercial value.)

There is a fourth scenario that bears mentioning- the dome home that is appraised as a traditional frame construction home using traditional frame construction comps. Though I am certain that loans have been done this way, there are numerous problems with this scenario. First and worst is that intentionally misrepresenting information in a mortgage application is illegal. Also, many applications have gotten far along in the underwriting process before an underwriter reviews the appraisal and sees a photo of the subject property and rejects the file because that lender does not accept domes. This creates wasted expense and frustration for all parties. It is a way to attempt to get a mortgage on a dome home- it’s just not a good one.

Appraisal

Lenders should be thought of as investors who invest in a loan. And each has their own investment criteria. Most investors want to know they can sell their investment at some point in time- and in the mortgage lending world this means that most lenders underwrite with similar standards and criteria so that a loan can be sold. While the general challenge for financing domes is the shortage of lenders or loan programs, I have access to several loan programs that will accept unique properties if the appraisal includes sufficient market analysis to establish a market valuation for the property. So the specific challenge is typically the appraisal. I can help find an experienced appraiser that will be able to complete the kind of appraisal required.

In addition to the usual appraisal analysis, the dome appraisal must:

• Establish a market value independent of construction type;
• Demonstrate that the home's uniqueness is accepted in the market, and;
• Address the uniqueness of the dome in the context of local area housing types and marketability.

This means that the underwriter must be able to predict, using the appraisal, what the marketability of a house would be in the event the lender ends up having to possess and sell the property. The difficulty with most dome houses is the lack of comparable sales - “comps” - in order to demonstrate the market value. Comps need to be similar enough to the subject property that using them to establish a market valuation is reasonable. Even very similar comps will be adjusted for minor differences, but the hard part with domes is that they are typically very different in appearance and therefore the predicted marketability can vary considerably from traditional construction. In other words, it's hard to say “a traditional frame house with 4 bedrooms and 2 bathrooms sold for $X in x days and so a 4/2 dome would sell for $Y in y days.”

The best comparable properties will be other domes. If there are no domes for comps, it may be possible to use other unique styles to establish the marketability of unique homes. And if there are other domes and unique houses in the immediate area even if they have not recently sold, adding information about them in the appraisal (quantity, distance from subject, specific architectural style that makes it unique, as well as basic information about the house) will help support that unique styles are acceptable in the area.

Good News

As you probably already know, domes can be a superior construction style compared to the traditional construction neighbors. But paradoxically, it is the dome that can be more difficult to finance. It is possible to find competitive financing for a dome home today. And as more domes are built and sold, they will be easier and easier to finance.

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like family financing, equity loans on property, etc. read our financing booklet.

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