Getting an Owner-Builder Construction Loan

As an owner/builder going for a construction loan, it is important to remember that the bank has no idea what your capabilities are in completing a house-build. The banker has no idea what your qualities, experience, and abilities are, unless you tell him.

With your first build, the banker has got to be convinced that you can do the job before he will risk the bank’s money on your project. Your job is to study the building process inside out, until you can speak it in your sleep.

Of course, you must have your houseplans drawn up so your subcontractors can make bids from them.

There are a few things you need to do before going for that construction loan.

Find two or more subcontractors in the various areas of building your house, who would be willing to give you a bid and build your house for you. It is important that you ask them if they will be willing to work with you. Some subs are unavailable because they work for a certain general contractor (GC), and none other.

1. Get estimate bids from your potential subs to take with you to the bank when you go to apply for your construction-loan.. Take a copy of your houseplans with you too. The first impression you make with your banker, will be a lasting impression so make it good. You don’t and won’t know everything, and you can ask the banker if he/she will be willing to help you with questions you may run up against such as “is this a reasonable price for xxxxx”
2. Study your job as General Contractor so you are knowledgeable and understand the building process rather in detail, so you can discuss it openly with the bank officer.
3. When we showed up with all our bids and the list of our subs for the various jobs, our banker was amazed and exclaimed that her regular GC’s didn’t ever provide that much information for her.
4. Make sure your credit score is above 700 to ensure you will qualify for the loan. This may require some credit clean-up for you. If you first need to “trim the fat” a little to pay off a few debts, do it. In the meantime you can continue your education of the building process and look for your subs
5. We looked for subs, developed our houseplans, found the land we wanted to buy and we got our bids, all of which took 7 months to accomplish before we even tried for our loan.

Explaining your understanding of the building trade, with a resume’ of anything you have built before, is an excellent way of convincing the loan officer that you are capable of taking on this building endeavor.

Think of anything you have ever built before, such as a shop project in high school, putting in a door, finishing the basement in your home, replacing a sink drain or toilet tank apparatus, building a garage, painting a room, replacing shingles or siding on your home, landscaping your yard (putting in grass and plants), or even building a play house for your child. “Anything” you have done is the operative word. Think back to when you were a child and your Dad taught you how to do this or that. Now come forward to everything you have built.

Now is the time to go to the bank with confidence and expect to get the loan. You should have done sufficient homework first, thus, you won’t waste either your time, or the bankers’.

You may have to shop around for a loan. . I do the shopping on the phone, until I find someone who is “interested” in working with me.

I had someone once tell me, you have to find the loan officer or bank who is “hungry” to make a loan. Remember: they aren’t all “hungry” so you shop around until you find the one who is. Remember, there are plenty of Mortgage Brokers, the banker included, who are trying to make a living, so look and keep looking.

Sell your abilities and qualities that will help build the house you want to build. Getting a loan depends as much on your ability to sell yourself as it depends on your credit rating. In this day of tight money, you may have to search a little further to find a loan, but it can be done. Believe it and you will find it.