[This is the Special Report 16 in Adobe Acrobat (PDF) format. Our
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Owner-builders are universally nervous about getting their construction
loans. Industry insiders tell you how, and how to get them the way you
want them. Lots of good tips from the folks that have observed countless
O-B projects. Eight pages, revised and updated with new reader tips, web links and comments.
Excerpt from Report:
- How to find a lender for your project
- How banks evaluate you
- Checking your own credit first
- Bracketed origination fees
- Internet lenders
- What you should know about lien laws
- Local non-bank sources
- Can mortgage brokers help?
- Points and fees
- FICO scores
- Problems with "owner-builder program" lenders
- HELOC's and interest-only loans
- Community banks and credit unions
- Information lenders need from you
"...Q. Do you charge higher interest rates and fees for owner-builders?
A. It comes back to a feeling of comfort with the individual. With a
contractor you have a couple of things you can fall back on. We require
insurance for accidents on the job sites. We are also covered with the
fact that the contractor wants to maintain good relationships with the
bank. An individual who is going through this for one time we have no
control on. Time constraints.
A. We do a permanent construction mortgage. All-in-one. On all
construction loans, we charge street rates and add a half a point. We
do 6 months of construction, and interest only. End construction in six
months, get final billing in seventh and pay principal and interest
starting in the eighth month. We can do longer construction loans.
A. We charge same for everybody. We do give a break to larger
contractors. Our normal origination fee is 1.5% We do some builders at
A. No. You might have to pay more if the package has less
quality or integrity. They have to convince me why they have the skill
and ability to perform as the owner-builder. I analyze what they do as
a living to see if they can be sufficiently available to supervise.
A. No. Two points over prime and could be lower. Two points origination fee, and that could be 1.5 points.
A. One point higher. But we are lower than "prime plus" You
might pay more interest and not pay points. We have a construction and
permanent in one loan, with one closing. Interest only during
construction. When done, if rates are lower then, you get a reduction
in rates for no charge..."
Sample Reader Tip Excerpts:
"I was in a hurry
because I heard interest rates were going up, but then I thought,
interest rates go up and down, don't let that drive you. You can always
Santa Fe, NM
"I had a short-term loan for construction, saved $5,000."
"I've been making loans for 20 years, and I can tell you that banks
don't care how much they lend for construction if local resale values
support it. My budget for my project comes out at $98 a square foot.
But the market is at around $140 a foot right now. I could easily get
that much, so I'm throwing in a salary for myself as contractor during
Santa Fe, NM