Saving for your retirement home has been tough, but finally you can build the dream house you always wanted.

Sure, it's a little different architecturally, but you've designed this house to be yours and yours alone, with many unique features that say "you." It's a nice, 3,000 sq. ft., log cabin. The fireplace will cost you more than most, because you fell in love with the Italian marble sample you found and it's no less than ceiling high. And because you don't really see a need for more than one bedroom, you've dedicated the extra space for a dance studio with imported bamboo paneling and skylights throughout.

Yep, it's you. It's unique. And it can't be financed.

When lenders make loans they make approvals based upon you, the borrower, and on the property, their collateral. You can have a great property but a not-so-great borrower, or you can have an excellent borrower and a lousy property. Both have to work or else no deal. Why?

If something bad happens, heaven forbid, and the lender needs to foreclose, they will want to sell the property quickly and for as much as possible. Foreclosures can cost lenders lots of money, so one way to cut potential expenses is to only finance homes which are similar to others in the neighborhood in terms of size, the number of bedrooms, and so on.

Equivalent houses in the area provide a basis for value. These "comparable sales" or "comps" help justify the sale price of your home because they show what people will pay for homes similar to your property. Comparable homes need not be cookie-cutter "boxes" that are all alike, but houses and lots with approximately the same size.

When you apply for a loan, lenders determine whether or not the house is similar to homes in the immediate area. Part of the comparison process is to look at a home's "aesthetic" improvements -- improvements which may delight owners, but perhaps few others.

Consider that ceiling-high, Italian marble fireplace in a log home, the fireplace that engulfs the room and costs somewhere near $100,000.

Guess what? Colossal marble fireplaces may not be on the top-ten list of log home amenities. The result: If there is a need to sell it may be difficult to market the property or get full value.

And a 3,000 square foot home with only one bedroom? Again, this may appeal to one person's taste, but marketing could prove -- ahem -- challenging.

Lenders worry about such issues because they may have a need to quickly sell properties and thus reduce potential foreclosure costs. And unless the appraiser can find several 3,000 square foot homes with one bedroom in your immediate area, the appraisal for the property is likely to be less than you want, which means lenders will limit loan amounts.

Lenders make mortgages based upon the lower of the sales price or the appraised value, so if your sales price came in at $200,000 yet the appraisal came in at $150,000, the lender will base your loan on the $150,000 appraisal figure in this example. If you wanted to put 20 percent down, your maximum loan would be 80 percent of $150,000, or $120,000, meaning you would have to bring the $80,000 difference to the closing table -- the $200,000 sale price less $120,000 in financing. Had the home appraised for $200,000, then with 20 percent down you could have obtained a loan for $160,000 and needed $40,000 for a down payment.

But what if there are no comparables? How can the lender be certain your home will sell in case of default? Does not a home with a limited sales potential represent more risk for a lender? Do lenders like more risk?

So be wary of unusual upgrades and "unique" designs. If you aren't sure about the marketability of a home improvement or special upgrade, call a local broker and remember -- it's nothing personal -- but one person's design treasure may turn off both today's lenders and tomorrow's buyers.

For more articles by David Reed, please press here.

Published: July 20, 2001

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.