By James in Sachse, TX on 4/13/2007
This is what TexasOwnerBuilder.com confirmed to me:
Based on the information that we went over on the phone, it looks like we have a great program for your scenario to be your own GC in Texas. Remember, we look for the following qualifications for owner-builders in Texas:
1. Fully documented income only (no "stated income" loans). Basically, you have to be able to document your income with W2s and pay stubs.
2. 700+ credit scores.
3. 5% down payment. Whatever you have already spent, we can count for you toward your down payment. In your case, the land you have paid for, the blueprints you have bought, etc, etc can be documented as a down payment for you. Just remember to pay for items with checks so that we can document the payment with a canceled check and an invoice.
4. On top of the down payment (if there is one left after we tally up what you have already paid), we require an amount of $10,000+ in savings for borrowers. So, basically, we need to document that you have $10K in the bank or in an IRA or a 401(k), etc. In no way do you have to spend the money or put it into the loan. It is just a requirement to qualify you for the financing.
5. Project manager. In your case, you can use the general contractor who plans on checking on your project for you every few weeks. For the loan, you don't have to pay him anything unless you want to. We can build any payment right into the loan.
So, based on all these requirements, to be your own general contractor and build in Texas, the program will provide a one time closing (aka, a construction-to-permanent loan). One closing will cover the payoff of the land, 12 months worth of construction, and the automatic conversion to the permanent financing.
The interest rates for a 30-year fixed right now are right around 6%, depending on the value of the project versus the costs and depending on your debt-to-income ratio. Our strongest borrowers are converting to a 30-year fixed rate today of 5.875%. But, in general, to keep it simple, figure on a 30-year fixed rate of about 6% right now.
During construction, your interest rate is PRIME + 1. This means the prime rate plus 1%. In other words, 9.25% during construction. This is an interest only rate and applies only to what you actually borrow each month. So, for the short period that you are building, whatever you draw for construction will have an interest only rate of 9.25%. During construction, you do NOT have to pay this amount. You can let it wrap into your permanent loan if you want. This way, you don't have to worry about 2 house payments while you build your new home. This works really well for owner-builders.
Our fee for the program is an origination fee of 1.5%, which will cover the one-time closing. And, it covers any assistance during the construction phase that you may want. It is our goal to ensure your building process goes as smoothly as possible, so you can move into your new home on budget and on time.
The next step is to complete the pre-approval process. It is a pretty quick, easy step that takes us only 24 hours to process for you."