Frequently
Asked
Questions

Frequently Asked Questions

• Do we provide construction loans for self-built homes?

  This is the only thing we do!

• Can I hire individual subcontractors, buy materials from any supplier, use my own labor, and manage the entire building process myself, without needing a general contractor?

  At Owner Builder Loans, we say yes!

• What states do you lend in?

  We are a licensed mortgage lender in Arizona, California, Colorado, Florida, Georgia, Michigan, North Carolina, South Carolina, and Texas.

• Are subcontractors required to be licensed?

  We don’t require your trades to be licensed, but your building department may. Please consult your local building department to determine which trades need licensing.

• Is it okay if construction has already started before I apply for the construction loan?

  Absolutely! The more work you can complete beforehand, the less time you’ll need to use our construction loan, which will save you interest.

• Can the project be a single-family home, renovation, addition, duplex, second home, rental, or for resale?

  Our licensing requirements limit us to funding only a new build of a single-family home intended as your primary residence.

• What building experience do I need, and what are the qualification requirements?

  You don’t need building experience, and there are no tests. However, to qualify, there are these basic requirements:

  • Minimum credit score of 700+.
  • A maximum debt-to-income ratio of 38%.
  • A maximum loan-to-value ratio of 70%
  • Equity requirement (Down Payment)

  Additional conditions may apply.

• What is the down payment?

  The down payment is not cash. It is the equity you have in your land before closing on your construction loan. Your equity totals today’s market value of your lot, plus any payments you’ve made towards soft and hard construction costs, minus any balance you still owe for the land. You must meet the equity requirement before you’re eligible to take a draw.

• Can I roll over my land balance into a construction loan?

  Yes, but only if your existing equity meets our requirement for the amount you wish to borrow. If not, you can build additional equity by paying down the land balance and/or covering some initial construction costs before you start the construction loan.

• What is the interest rate and closing costs?

  Your interest rate depends on your credit score. Interest is billed and paid monthly based on the total amount drawn out of the loan. Please refer to answer number 23 for additional information.

• How do I order construction draws?

  You can request draws by fax or email. We’ll then send the funds directly to your checking account via ACH. Draws are available in the construction order, per your Building Budget, and you may request as many draws as you like, subject to conditions therein.

• Do we need to pay subcontractors and suppliers with our own cash before getting a construction draw?

  No. You do not have to use your money before you get a draw. We release draws upfront so you can pay your subs and suppliers the same day services are rendered. Not too many construction lenders will do this, but we do!

• What about loan inspections?

  We’ll conduct our own inspections at no cost to you. Sometimes, when requesting a draw, we will ask you to send photos from your cell phone to verify that previous work was completed.

• How long is the construction loan term?

  Our loans are for 12 months. There is no prepayment penalty.

• What happens when I complete construction?

  We will be happy to help you refinance into a new mortgage at a wholesale interest rate, or you can refinance with any other mortgage broker or lender you choose. Conventional mortgage lenders will not refinance a partially built home. Before refinancing, your new lender will require that your home is 100% complete and has a certificate of occupancy.

• What happens if we can’t finish construction in 12 months?

  To give you more time to complete construction, we offer 6-month extensions as long as the loan is not in default.

• When can I start the application process?

  As soon as you get your building permit, but no sooner. This is a federal law for construction lenders who provide owner-builder loans.

• How long does the application process take?

  Typically, it takes about 30 days from when you complete the application process until you sign the loan documents.

• Can closing costs be included in the loan?

  Yes, we will include all closing costs in the loan and disburse these funds on the day you close. The only upfront cost is for the appraisal, which is completed during the application process. The appraisal typically costs between $600 and $900.

• What happens if I do not need all the money allocated in my building budget?

  You do not have to draw all funds approved in the construction loan. When you refinance into a conventional mortgage, it will be for the total amount drawn out of the loan.

• When will you pull my credit report?

  We will pull the credit report after you complete the loan application and upload all required documentation.

• I am self-employed; am I eligible for a construction loan?

  Yes, you must provide two full years of tax returns with all schedules, showing positive income.

• What is my interest rate and loan costs? What should I do next?

  Answer our Qualification Questionnaire. Once we receive your answers, we’ll compare them to our requirements and email you the results, including loan costs, interest rates, and everything you need to move forward. We’ll call to let you know once we’ve sent the email.