Financing for Owner Builder Construction

Financing for Owner Builder Construction

There's an article recently from Bloomberg that says confidence of U.S. homebuilders unexpectedly dropped in January to its lowest level since last June (see link below). If your borrowers are looking to buy a new home, builders may not be their best option. They may have to look elsewhere to find new construction. If you have borrowers who want to act as a general contractor (to save money and coordinate the construction of a custom home themselves) we may be able to help.

Traditional institutional lenders shy away from owner builder constructions because they see them as high financial risks. They believe that the construction can take longer and that supervising construction work should best be left to professionals. They'll usually require you to hire a General Contractor, which defeats the purpose of trying to save money on the construction.

How much money can be saved? General Contractors can charge up to 20% of the property's value as their fee. That's a sizeable chunk of equity that your borrower may prefer to see the benefit from.

At Fairfield we can do owner/builder construction loans. We can determine if your borrowers have the requisite experience to take on the task. You don't need to be a General Contractor or have General Contractor's license (unless required in your particular state). However, your borrower will need some verifiable experience for us to determine if they are capable or not.

Feel free to contact me if you have one of those hard-to-place owner/builder construction loans. Maybe we can help.