construction loan ?

[tinman]

What is the best way, if any, for a person who is not a licensed GC to get a construction loan for building thier own house?
Most of the big banks want you to a GC or licensed builder before loaning you any money. Example: I went to the bank and the pre approved me for the mortage loan but really shyed away from the construction loan questions.
Any thoughts?

[Rich]

Most will want proof of proficiency and 20% down.. both are difficult to do. Start with a mortgage broker - they will have more resources to choose from.

[HDNord]

Call around and you should find a bank that is willing to finance owner/builder loans. Check with "Help You Build" type companies and see who they use. Some banks will even count sweat equity as part of the down payment. It is much easier however to obtain a loan if your building lot is paid for.

We were able to obtain a construction loan without problems at a good rate and we will be the owner/builder without a contractor licensee. One factor I'm sure that made it easier for us is that our lot is fully paid and we will have a considerable amount of our own money in the home.

As mentioned by Rich our bank required a proficiency statement from us. We had to write a summary explaining to the bank why we were qualified to act as our own contractor. I do have experience working with subcontractors, contractors, and have successfully completed many DIY projects.

We also have hired a contractor that we pay as a consultant by hours used and that also helped relieve some of the banks concerns. So far we have paid him about 20 hours.

[roger g]

The best thing that ever happened to me years ago was when the bank refused to lend me any money because I was building it all myself. I had enough saved to get me started and then I would use my credit card and pay it off every month. It's amazing how much material you can buy and then install it evening and weekends. If you were paying for labour it wouldn't work. I plonked down a lot of cash to buy cement blocks and then took 3 months to do the basement and the garage. In those 3 months I was only buying bags of portland and mortar and saving like hell. When the blocks were layed I had saved enough for the sub floor. The whole thing was paid for by the time I was 28 and haven't looked back since. The banks did me a huge favour.



roger

[setmax]

Its amazing what loans can do to the lives of an individual. For some this is a term that spells doom for them whereas there are smiling individuals who owe a lot to the people who provided the finances to them at the right time. To me the agony or happiness subsequent to a loan largely depends on the person who actually applied for the loan. Some people in their haste to procure the funds simply overlook the terms initially only to realize it at a later stage. The prudent individuals evaluate all the finer points and take the plunge when its best suited to them. So loan as a whole is not the one to be blamed.

[TnAndy]

I'm in Roger's camp.

When I was 24, and just out of the Army, ( early 70's ), wife and I had saved 10 grand during my four years in the service. We wanted to build a small house to go to school, as we knew we'd be there at least 4 years or more. So we did the same thing...couldn't find a bank that would talk to a couple of "kids".....so we bought a lot we found at a bargain, and just started. With the money we had, we got the small, ranch house under roof, and I figured THAT would show the banks we were "serious" about the deal.

Wrong.

They REALLY won't touch a project that is already started ! ( Hey..... I was a kid....what did I know....ahahahaha ).

Fortunately, the building supply place I'd been buying from was a small, locally owned place, and I explained my plight to the lady that ran the credit department. My account was a 'pay in full in 30 days' type. She asked me IF I could get the rest of the house done in 90 days, as then I could get permanent financing from a bank she would recommend, and if I could, the supply place would carry me for 90 days. I said "yes mam".....and quit my day job to work on the house full time. We got it done, got the other 10 grand we needed to pay off the building supply place, paid THAT loan off in 5 years, and had a nice little house free and clear.

Sold it 3 years later for 50k, took that money, built our next house with the cash, and never even considered a loan.....we did finance the 75 acres of land thru the seller, and paid him off in 9 years on a 20 year note.

Been mortgage free for 17 years now.....current property worth 6-700k minimum. Also built 3 new houses in the last few years for rental purposes.....did that with cash only too....amazing how much money you can build up when you don't pay out a fortune in interest and fees to banks :D

[DeeTee]

I think a lot of this depends upon the bank, the state and the county and other factors. In my experience it came down to showing I had a strong income, had been paying for awhile on the land and brought very detailed house plans to the loan officer. It also helps if you have some confidence and can convey that confidence about being able to build. In my case they would loan up to 80 percent of the estimated appraised value (an appriaser looked at the plans, the lot, the neighborhood and came up with a number). Of course it definitely helps your case if you aren't over-building for the area. Since I already had the well installed and power to the lot those items were considered part of my equity along with the amount already paid on the lot.

[Owner Builder]

Many lenders no longer offer owner builder construction loans... or construction loans period. The lending industry has really tightened up. I built my own home about 5 years ago with a company called Pierson Gibbs Homes. They handled the financing in house, so there wasn't any fees at all. Their website is www.p-ghomes.com

[elsarobert111]

Hello everyone, I am 29 years old and I am wondering of tax deduction for home loan. If a person carries a home loan in other country (other than US) is there any tax deduction (relief) given by IRS? A part of his earning in US is being used to pay home loan EMI in other country. Is there any tax deduction for home loan in other countries? Any response will be appreciated. Thank you so much.

[misba]

Banks have begun to dump bad construction and land loans at discounts, curtail new lending and halt construction projects that are under way to preserve capital.
---------------------
Misbah

Home Loans (http://www.talkinghomeloans.com)

[amandaaz]

What legal obligations are involved in a loan with a signed contract? I've signed the contract. The bank told me my monthly payments. The lender/underwriters have backed out b/c the appraisal was high! What legal obligations are involved since I'm right on my end and the contract was signed saying that the bank is going to get the loan. I'm in limbo now with nothing to making payments to except outrageous payments of interest on a construction loan? Isn't there something that can be done to push things along?

[angel]

you want a construction loan and one that can be converted to a permanent loan. Why? During the construction process the builder is entitled to a draw (of money) at predetermined stages. Also, with a construction loan you only pay interest on the money that is drawn. When the home is completed you then need a permanent loan.

[brianvolt7]

My wife and I were going to build our own home a couple of years ago. Even though I am a PM in the electrical field and carry a license and my prop is free and clear, they wanted a GC to get the loan at 8.5%. I looked into kit homes and the company I chose volunteered free of charge to sign on as my GC to secure a loan. We ended up buying nearby our land instead of building but we secured a Cx rollover loan because they signed on as our GC. Owner builder loans were available at the time but were at a much higher rate, 11%. This is similar to what was mentioned by HDnord.

Call GC's near you, they may sign on for a fee to protect your interests and check in on your project occasionally, this will qualify you for a Cx loan.

[whitmirehomes]

Many things have changed with the way banks loan money these days, especially when it comes to building. Consider the terms that a bank presents to you: is it wise to finance a construction loan with outrageous rates, just to get the money?

I would suggest that you seek advice from your local Small Business Administration office, local association of bankers, third-party banker (possibly a friend) that won't be involved in the process, etc.

You might find some unique information that could lead to a solution.

-Matt Dubnik
Whitmire Homes
Gainesville, GA
"Building Custom Homes since 1978"