I can't answer your question about mortgages, but another thing to check is insurance. It turns out that it is hard to get insurance for an owner-builder, depending upon how they look at your role in the build. Customarily, it is the contractor's responsibility to provide insurance. I'm building my own house, and we were able to get insurance, but- Guess what? They will only insure you for a year!

I think a lot of OB's with significant DIY work are cash based. I don't work at a bank but the concept seems like a high risk loan - what if you got sick at 18 months and the house sat there 1/2 done? What would you be able to sell it for at that point? Not much...

Thanks for the heads up on insurance, @flgargoyle! I'll have to check that out. I did check on permits - in my area they are good for 3 years.

David - yeah, I understand the risk aspect. We're actually in pretty good financial condition, though. We could put 30-40% down and still have a cash cushion. (Or alternately, get solidly into the construction before starting to take draws.) In the scenario, if we got halfway into construction and something bad happened, the land by itself would still be worth more than what the bank had lent out. But hey, I don't make the rules. :-)

Also worth noting that we could definitely afford to hire out all the work. This just ruins the fun of it for us.

Are there any alternate ways to finance a build that I may have overlooked? (Aside from a rich uncle, that is.)

A private lender may be able to accommodate your desire to stretch out the construction period. However, the higher-than-bank rates will cut into the savings you're planning with diy.

All you need is cash. 100% cash. And a VERY understanding municipality and insurance company.

Owner builders find it extremely difficult to find financing in the first place, and you want to stretch the timeline out even beyond a typical extended owner build timeline. That puts you in the highest risk category, as most DIYers overestimate their skills and underestimate the costs and timeline to begin with.

From their viewpoint, land with a half finished house on it is actually worth less than one that hasn't had any construction begin on it. A half finished house is an attractive nuisance to the neighborhood kids and a big risk for some type of injury to occur on the property. And, by the time the bank gets around to actually doing something with the project, it will more likely need demolishing than it would need finishing as it would have sat so long. That is NOT a risk even a private lender would be willing to take unless his nickname is Knuckles and you pay an exorbitant vig every week.

Permits also expire and they may require you to be a licensed contractor with the state in order to build.

Thanks for sharing your experience westiegirl!

I think it varies greatly depending on your relationship with your bank and perhaps insurance company. My parents were GCs on their own house, doing quite a bit themselves. It was a leisurely that ran into some delays, and took almost 3 years. They paid a boatload in interest, insurance, and property taxes, so keep that in mind (the assessed value, at least here, increases greatly not long after the build begins). But my parents have a long history with the bank and insurance company, and I wonder how frequently this arrangement is possible.

A general note about being one's own GC: I looked into it intensely for the past year, and I've come to the conclusion that for most people, it is not worth it. Consider instead finding a GC who is patient and willing to let you be extremely involved. Then you can have real ownership over every decision, you can do lots of the work yourselves, but you can have an expert to recommend what type of I-joists for the floors, what type of framing for the roofs, what type and brand of insulation, what local subs to use, etc etc etc. My parents, in their build, constantly turned to a GC they knew, and had they not, I think their build would have been much, much more of a headache. Depending upon your arrangement, a GC knowing a couple of less expensive subs and having decent discounts with suppliers can nearly pay for his fee, and having a GC can get it done within the year that banks are looking for.

We are working with a GC, but I designed my house (with help from folks on here) from scratch, made almost all the decisions myself, and will do a decent amount of the work myself. I think I'll have plenty of pride and satisfaction in this build. Just a thought!

I have talked with a number of banks/credit unions, and they all say they want the project done in 6-8 months, but will extend the loan up to a year if absolutely necessary.

That's very generous for a diy build.

Despite a long history of doing renovations as a licenced renovator, when I built my first home the second tier lender insisted I employ an experienced homebuilder as manager. As a licenced builder--one or two homes at a time--I still build with cash. Once the house is complete, the bank is happy to lend you money!

DIY and the bank deadline looming will be extremely stressful. I would only attempt DIY home building with cash.

Construction loans carry a much higher interest rate than conventional mortgages so it is always better to build your house as quickly as reasonably possible. Any savings in DIY will be eaten up by the interest expense in carrying the loan. I did all the staining, painting, and clean-up on the job, but it didn't slow down the timeline. Of course, I was at the site at daybreak and continued until sunset. Still, our house was complete within six months. I'd go with the pros and leave any DIY for smaller projects. Just my opinion, but then, maybe I am worn out from all that job site cleaning and painting!

Terri23 please let me know if I can see pics of your Vandenberg?

Although this is an older thread the issues still seem to remain the same. We were approved for a construction loan at our bank, until they learned we were general contracting/building ourselves. Here in Canada although my husband is in the industry as an Architect, the major banks we spoke all have a rule that even if you were to own your own construction company you can't build your own home as an owner/builder with a construction loan.

Thankfully we had enough saved (from renovating and flipping a few other properties over the years) to build the shell and close the place in, although at some point it will become a pay as we go approach to finishing the interior. We found being able to work on the construction of the place yourself is a huge savings if you have the skills. But it's also time consuming with full time careers in our case, so you have to be willing to spend all of your free time on the project if you go this route. I'm actually happy we didn't get a construction loan in the end so we don't have the pressure of looming deadlines and can build at our own pace.

I grew up in an area where it was popular to buy some land and build your own houses before having kids. Tract builders were not operating in the area at the time so that may have had something to do with it. I had several friends in high school whose parents were still working on finishing their home (yes still not finished 15+ years later). Going through a divorce with a 75% complete home on your hands is not fun.

We just closed on the construction loan from hell. Alls well that ends well and the rate is great (we paid 70% down + paid for land, with great 800+ credit scores, but the bank was changing systems and the loan officer was very inexperienced and not a numbers person -- sent out stuff that made no sense whatsoever and it would take calls and going over her head to get things correct,. To their credit they did admit they were wrong. Even at closing today ALL of the closing docs had the street name spelled wrong,

vent over -- now to your question -- we are on a 16 month timeline, but the bank couldn't do that -- ended up with the bank allowing 24 months to build! So it can be done, but we are using a GC so your situatiin my be different.