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O-B Financing in Texas


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By Bill in Waxahachie, TX on 7/28/2006


Has anyone recently obtained OB financing in Texas ?

 


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By Jason in Burleson, TX on 7/31/2006


We haven't obtained the final financing, but I've talked with individuals at a couple of banks that are associated with the "Farm Credit Bank of Texas" about financing for our home outside of Burleson in Johnson County.  Financing appears to be fairly simple with one of these banks if you are building on a lot outside of the city limits or in a city below a specific population size.  Not sure if that would apply to you or not, but you can look here farmcreditbank.com/texas to find the bank that serves your area to find out for sure.



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By Bill in Irving, TX on 8/29/2006


Bill, I have posted this here before, but I got my construction loan with First National Bank Southwest in Frisco. I dealt with Burl Huffman and Scott Henley there. They were very helpful. I did not go with them for my permanent loan as I was able to find more competitive rates from quotemearate.com. Many lenders will tell you to be wary of on-line lenders, but my experience was good and I saved a lot of money. Do your research and stay on top of them and you will do fine. If you would like to read more about my project in N. Texas, please visit my website at My Construction Website. 
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By Charlie in Magnolia, TX on 11/12/2006


Try Dan at builderspriority.com, he helped with the stupid "Builder of Record" requirement and got a  construction loan under 7%.
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By Paul in Apopka, FL on 3/1/2007


For O-Bs in the state of Texas, you should check out Texas Owner-Builder:

texasownerbuilder.com

They can lend in the entire state.  They look for fully documented income in Texas, so no "stated income" or "no doc" loans.  But, depending on the scenario, they can actually cover all of your costs. 

They did tell me that there were some cash reserves requirements, even going full doc.  But, the program seemed very sound.  Great permanent financing is wrapped into the construction loan with them.

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By James in Sachse, TX on 4/13/2007


Yea, texasownerbuilder seems to be a really good deal.  The only thing is they charge 1.5% Loan orgination fee.  The construction loan is 9.25% so it is prime +1% and you have to have 10K in cash.  This can be in 401K, IRA, or something else but you have to have it.  You also have to have a 700+ beacon score, so they are pretty strict on loans. 

They are closing 30 year fixed at 6% though which is pretty good and they have a one time close and the ability to roll your interest back into your loan.  Overall not bad, a bit expensive but we don't have many options.


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By Charlie in Magnolia, TX on 4/13/2007


James,

You and Paul seem to be looking at the wrong web site. It's builderspriority.com. I'm certain the origination fee is not 1.5% and I can assure you that I don't have a credit score of 700 (wish I did).  Please compare these two companies and let us know what you what you find

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By Paul in Apopka, FL on 4/13/2007


James,

I am not sure about your construction rate with Texas OwnerBuilder.  I am looking at a rate during construction right at the prime rate (8.25%). ??? So, I'm not sure if it was a matter of a specific scenario or what. ??  But, I agree that I really like the 30 year fixed product at the completion of construction all as a part of the one closing. 

I definitely looked into that other option - BuildersPriority.com.  Their financing in itself seemed okay, but it looked to me like they were making their money on forcing you to use their subs and suppliers.  That seemed to be where they were making their big profit.  I wanted to go with the loan that let me hire whatever sub-contractors I wanted and use whatever materials I wanted - as an O-B that's where the savings are. 

I think the trick is to look at the overall savings - otherwise, you might as well hire a GC and get really cheap financing at any local bank.

Paul

 

 


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By Ray in LaPorte, TX on 4/13/2007


Paul,

Builders Priority offered the 30-year fixed rate option, currently at 6% with a 12 month rate cap!

You can use any supplier or subcontractor of your choice, however I have found significant savings using some of their suppliers, such as 30% discount at Sherwin Williams, 55% discount at Craft Doors, Granite Countertops installed for $26 per sq. ft. with 1 1/2 inch edge, etc., etc. We are really good bargain shoppers but I have not been able to beat these deals. I will keep you posted.

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By James in Sachse, TX on 4/13/2007


This is what TexasOwnerBuilder.com confirmed to me:


"James,

 

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."


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By Michael Penn in Dripping Springs, TX on 4/14/2007


James, thanks for posting the detail about the requirements and terms from TexasOwnerBuilder.com.  I had talked to them before.  Best I can recall the two problems I ran into with their requirements were "Full Doc Income Only"--nearly half our income is from self employment and much easier to show that half on a "Stated Income" basis, and also the fact that our housebuild is 200 miles from our current employment was going to be a deal breaker.

My two active applications are in right now with Builder's Priority Mortgage and with Capitol One, both in the Houston area.  Seems like fitting one's personal situation to a lender's requirements is a bit of an art--it's definitely not a one-size-fits-all kind of deal, and the devil's in the details.

FYI, if you're not aware of it you probably will want to check out the posts about Texas owner-builder finance on the Texas local forum.  There are currently 72 posts under the heading:

O-B Finance in Texas

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By Michael Penn in Dripping Springs, TX on 4/14/2007


Paul, as far as I can tell in my dealings with them, Builder's Priority is a broker, and they don't have any hard requirement that you use a specific set of subcontractors or suppliers. 

They do have a close working relationship with the owner-builder consultant company OBCH, obchinc.com,  and I'm sure they often steer folks that way, as it makes it one step easier for them.


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