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By Pat in Arnold, CA on 1/7/2010


Anyone have leads on owner-builder loans? 
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By Pat in Arnold, CA on 1/11/2010


I also found another source of owner-builder financing. Normandy.com.
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By P in North, FL on 1/15/2010


Normandy has been mentioned here a few times and they have been listed in the "List of Construction Loans for Owner-Builders" thread for a while. It doesn't seem as if anyone has used them.

I did get some additional info from them recently, though.

They are not credit score driven, but it will affect the rate and LTV of the loan. Owned land can be used as a down payment. A site supervisor is not needed.


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By Pat in Saratoga Springs, UT on 1/24/2010


I know it's been said before, but I think it's the best advice for loans. Keep it local. I know we all want to find our stuff online because it's easier, but I don't think that's the best way to obtain financing. Call or visit your local banks/credit unions to see what their terms are. I probably went to 20 of them, and most of them just laughed when I told them what I wanted to do. "Why don't you just buy a foreclosed home...", seemed to be the most popular response.

Finally, I found a credit union that would take an owner-builder with just under 10% down.

My advice, stay away from the web guys and keep it local.


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By Pat in Saratoga Springs, UT on 1/24/2010


By the way, we aren't building a mansion or a little earth dome out in the forest. You can check out our project at costinconstruction.blogspot.com. Feel free to leave a comment or any questions.

-Pat


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By Pablo in Mullica Hill, NJ on 2/10/2010


I just signed paperwork with a local bank, and the process was very smooth. I asked for an informal meeting in early December to find out about their requirements and procedures. A couple of weeks later, I went back with all of the information and I was approved in the third week in January. I will have to do two closings, but I must say that the process was pain-free. There is no doubt that a local bank or credit union is the way to go.
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By Pat in Arnold, CA on 2/10/2010


Was this for an owner-builder loan with you as the general contractor?
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By Pablo in Mullica Hill, NJ on 2/10/2010


Yes, I am the owner-builder.

Pablo


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By Pat in Arnold, CA on 2/10/2010


One of the most difficult things I've found with the smaller community banks is that many don't handle jumbo loans. You can't build anything here in California for $417,000 unless you want only 1,200 SF. I did find one community bank that handles construction loans, but not jumbo perm loans, so I would have to find a perm loan elsewhere. I really wanted to have one closing and not two.
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By Pablo in Mullica Hill, NJ on 2/10/2010


I understand your problem. I am lucky to be able to stay under $417K. Unfortunately, the appetite is not there for jumbo loans.
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By Steven in Colorado Springs, CO on 2/13/2010


I had great luck with Sunflower Bank. They're out of Kansas with locations in both Kansas and Colorado, have been VERY easy to work with, and very friendly to O-Bs and partial-DIY approaches. 

Don't know if they cover California or not, though. Their URL is sunflowerbank.com.

Good luck!

Steven in Colorado Springs

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By Pat in Arnold, CA on 3/10/2010


I sent my loan docs off today to El Dorado Savings Bank. We'll see how it goes.

I understand from another thread that rental property now counts 100% against you and they don't offset it anymore by your rental income. Sigh... Also, I'm hearing that all banks now require (because of new FHA regulations) 6 months' reserves on all outstanding mortgages you may have, along with the mortgage you are applying for. Geeeze. What other hoops do you have to jump through!!! This is getting a bit crazy.

We can cover the 6 months' reserves, but it will just mean less money down. Fingers crossed that we qualify for the money we are wanting because of these added reserves.


Pat

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By Pat in Arnold, CA on 4/2/2010


Typical of banks these days... El Dorado Bank received our packet and said, "Oh by the way, you can't owe anything on your lot. You must own it free and clear." Why didn't they tell us that BEFORE I sent them the packet of documents. Geeeeze.

However, now we have good news with another bank. BBVA Compass Bank spent two weeks looking over our application, tax returns, etc. Yesterday, I received a security email of documents from them giving us a Good Faith Estimate on the construction-to-perm loan. All we have left to do is fill out the materials listing and the contractor information sheet along with supplying two sets of plans. We should get all this done in the next four weeks.

Fingers crossed!
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By Dennis in Union Grove, AL on 4/20/2010


I'm not at the O-B-loan point yet, but I did buy 7 acres a couple months back and all the big banks said no to a land loan, so I stopped by the local small-town-USA community bank and got the green light.

The whole process was painless, and they will be the first place I shop for an O-B loan.


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By Pat in Arnold, CA on 4/20/2010


Did you ask them if they provided O-B construction loans? My community bank where I have my lot loan doesn't carry them anymore.
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By John in Lewes, DE on 8/4/2010


I'm in Delaware, and here O-B is a sure no right now. One of the larger banks no longer makes construction loans. The remainder all insist I have a professional GC who will handle the money. Several of the banks have an approved list of acceptable contractors. I can obtain an out-of-state loan, but they all seem to have strings attached that I am not happy with.

Has something happened recently that I have missed?

John B

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By Sabrina on 8/4/2010


Hi John, my husband and I read The O-B Book cover to cover and back again, etc. We did our 1,000 hours at least, probably more, had detailed prices down to knobs on cabinets, schedules, bids, proof showing my husband who is an electrician by trade, and works for a huge construction co. and myself, available to be on site as much as necessary, could run our own job, no problem.

We were set with a nice presentation to impress the banks... We found some land outside of Denver, CO, just perfect for our project and then went to find financing. Slam. First, our Realtor gave us a hint that she had not seen a construction loan given in a year. We still pursued as many leads as we could, but quickly found out that the majority of online "loan agents" were non-existent, and banks had stopped all their construction loans. We got a couple to listen to us longer than two seconds (try being an O-B AND building a log home...). When we started saying we'd use a GC (figured we'd take one of the routes mentioned in The O-B Book, and pay a fee), only to find from at least one of them that we would need approximately close to $200K to obtain a $415K land/construction loan!!!

Within five days we felt shut down with nowhere to turn. I did mention our problems to two different log-home companies, one of which was going to be the supplier of our home; they had no input, and did not offer much opinion nor advice either before we went to lenders, nor after... In our particular situation - my husband having worked in a different state for five years, we gave up on it fast and switched to purchasing a home and are in escrow now for almost the exact same amount we would have needed to buy land and build our dream home:(  We will someday go back to it.

Hope all of you have better luck than we did. I am very curious how any log-home companies, and all the related trades, are staying in business.

Sabrina W.
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By Pat in Arnold, CA on 8/4/2010


We had been planning our home for two years. We bought the land and started pouring money into it. We got the four-bedroom septic installed and 400' driveway graded, along with about $8,000 in soil and geo testing. We hired an architect, along with a contractor to supervise over the design for building-cost guidelines. Over $10,000 later, the finished plans were $300,000 over our budget to build, so we scaled down the plan. The contractor assured us we would come in on our budget with the 2,000 SF new house plan.

Then several more thousand, plus engineering the plans (required here); we put the finished plans out to bid and we were now $200,000 over budget. We did find a bank that would give us a loan (if we were within our budget) but it would be a GC project and not an O-B project. BBVA Compass Bank still gives construction loans with 20% down (as of a month ago). They have several branches through the USA and although we are in California, we were going through their Denver branch.


We also talked to the local Umpqua Bank (California, Washington, and Oregon) and they too were still giving construction loans. However, they said they hadn't had one approved yet, because the appraisals keep coming back less than the cost to build. Major problem here. I know one contractor who just financed/built out of his pocket a $1.2 million spec house and upon completion the three-car garage with the 1,100-SF in-law suite above it was given $15,000 on the appraised value and it cost him $175,000 to build the garage!!! It's craziness.

We put our lot up for sale and ended up buying a 53-acre ranch with a straw-bale house on it that was only 6 years old and larger than the house we were going to build, plus an added 51 extra acres all in our budget ($200,000 less than cost to build). The kicker was a 4.7% jumbo loan with zero points to top it off. We are happy we didn't build. We got so much more for our money and a 280-degree view down into a valley, all up here in the California Sierras. We close escrow next week.

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By Lisa in Fredericksburg, VA on 9/29/2010


In Virginia, I have found two banks that will lend to owner-builders... Virginia Partners and Stellar One. VA Partners is the easier one to deal with.
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By Patrick in Naperville, IL on 10/12/2010


I agree. Local banks are your best bet. I am starting my second O-B and HAD financing set to close through a small bank here last week. Well, they are pretty much under a FDIC order to not lend, so have had to find alternative financing.

Have ran across at least four local banks that do construction loans, as well as Wells Fargo. Have gotten the pre-approval from a local bank and Wells Fargo. While I don't really want to go with Wells, they are kind of my back-up plan.

I am in the Chicago area and quite a few banks still offer construction loans, albeit I have ran across several that no longer do. I think it has probably helped me that I just built two years ago and sold that house for a lot more than appraisal and a lot more than the cost to build. So while I am an O-B - I am an "experienced" O-B.

Also, it does take solid credit and some savings/assets on hand. My wife and I have credit scores between 750-800, and substantial vested retirement savings.

If you have subpar credit, and low cash/assets - I would imagine this environment may be challenging.

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