Resources

Here are some valuable tips
gathered from successful owner builders:

1. Collect all waiver of liens. After every payment (cash, check or credit card) to a contractor and supplier, have them immediately sign a waiver of lien. At the end of construction, the title company which orchestrates the closing of your permanent mortgage will require evidence your construction has been completely paid. Failure to collect all waivers can delay refinancing your construction loan into a lower rate mortgage which will prolong the length of time you are paying a higher rate on your construction loan. OBL can give you blank waiver of lien forms.
2. Prevent theft of building materials. If possible, install a gate and/or a fence at the job site. Putting up “No Trespassing” signs or “Beware of Dog” signs may also be helpful. If you have an RV, parking it at the construction site will let passersby know that the construction site is being monitored. Consider borrowing a friend’s RV if you do not own one. Parking a spare car at the construction site may have a similar effect. Even an erected tent can be useful. Don’t let your lumber company deliver lumber until your foundation is installed and the framers can start the next day. Don’t let your windows and doors be delivered until your house is framed and they can be installed the same day. Lumber and windows are most vulnerable to theft. Have your builders risk insurance include a theft endorsement equal to $10,000 or more.
3. I am not a fan of giving anyone a deposit. Considering the shortage of labor, a deposit will seal your priority with your trades. Just make sure your trades are reputable. 50% deposits should be expected for windows, cabinets, and any special-order items.
4. Always pay your lumber or framing materials provider directly. Never have your carpenter pay your lumber company. Always pay the lumber company directly. Framing materials represent the single most expensive component to your building costs and failing to pay for your materials directly may mean you have to pay for them TWICE. Some contractors fail to remit your payment to the lumber company or misuse your payment to pay down lumber purchases for other projects they are working on. If this happens, the Lumber Company will place a lien on your home for the unpaid building materials. If this happens, good luck refinancing your construction loan. Play it safe and ALWAYS pay for the framing materials directly and not by a third party.
5. Read the fine print. Although some estimates/bids/quotes may seem to include all materials or services for a particular element of construction, they may not. Make sure you fully understand all contracts before signing. Ask your contractor, “What isn’t included in this bid that you may need?”
6. When in doubt, hire a professional. Many believe that the more they do themselves, the more they are going to save. Unless you have significant experience in a specific trade, it is highly recommended that you sub-contract this work to a professional. Errors cost time and money. Additionally, subcontractors’ work comes with a warranty, yours does not. Consider also: the time you spend doing these things is time taken away from your normal earnings. And if you can only do these things on weekends, it’s going to take even longer to complete construction. The longer construction takes the more construction loan interest and loan processing fees you will pay which can offset any potential savings from using your own labor.
7. Pay all monthly billing statements on time. Late payments will affect your credit score. I had no idea how much damage one late payment can do you my credit score.
8. Don’t buy a new car or recreational vehicle or create any other debt until after you refinance the construction loan. Additional debt will raise your debt-to-income level which will cause a higher interest rate when you refinance your construction loan. If your debt-to-income goes too high, it might prevent you from qualifying for a refinance loan.
9. Stay in control of your building budget. Be careful not to overspend on building materials, such as, cabinets, floor coverings, and light fixtures. Keep to your building budget. After the house is built, there will be plenty of time for upgrades. The last thing you want to happen is to run out of construction money. It is very difficult to refinance your construction loan with a partially finished home. We were lucky. We qualified for a loan increase which OBL gave us. PHEW.

If you have a tip we can share with other Owner Builders, please let us know.

Best Regards,
Fred L. Arnold, President
Owner Builder Loans, LLC