Construction Part 3: DIY/Owner Builder Construction
Andrew Kudwa
daisies and wildflowers
In this last installment on construction financing, I want to look into our owner builder construction program.  Owner builder is when you serve as your own general contractor during the construction process.  Based on the information I have seen in the marketplace, GreenStone is still the only lender that offers this type of construction program.  This might be because most lenders think that this is a riskier type of construction, but after doing construction loans for the past 7+ years, I have found out that is quite the opposite.  As long as the necessary questions are asked on the front end and the proper monitoring is done throughout the process, this can actually be a smoother process.  This is because when you serve as your own general contractor, you know the general contractor is not misunderstanding your opinions or ideas.  However, this is also one of those “Buyer Beware” moments.  You might be saving the 10% or more by not having a general contractor, but if you don’t have the time to spend researching for quality subcontractors and going out to the property on a continual basis, this is probably not the option for you.Construction Tools

Here is a shortened list of the suggestions that I give out to potential customers that are looking to act as their own general contractor.

1.       Start interviewing subcontractors very early.  Choose contractors that have been recommended by several people and ask them for references.

2.       Compare bids and don’t always take the lowest bid.  Look for quality and reputation.  

3.       Make sure that the carpenter you choose is willing to work with your choice of subcontractors.

4.       Get a good handle on the permits you will need.

5.       Plan on visiting the site daily.

6.       Review your house plans regularly to make sure building is going as planned.

7.       Review building codes for your area.

8.       Watch for cost overruns.

9.       And take A LOT of pictures that are dated.

As a loan officer, I really want to make sure that if you act as your own general contractor, you have a good idea of what the actual costs of your project are going to be. Even then, expect overruns. Make sure to get two to three bids on all your large items.  You won’t need three bids on things like appliances or landscaping, but on other items this is part of that due diligence process.  As a lender, we also want to see that in your plans you have allocated 15% for cost overruns.  In most cases, an owner builder project has more cost adjustments than if you were to hire a general contractor which is why we require 15% instead of 10% as I stated in the previous blog.  

As always for more information go to or just post a comment with your questions and I will get back with you promptly. 

Construction lending:

Related Posts:

Home Construction Lending Series

Construction Part 1: Prequalification

Construction Part 2: General Contractors

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