Construction loans can be used to finance the purchase of land, the construction of a new home, or the renovation of an existing home. Construction loans are typically short-term loans, lasting for a period of one to three years. During this time, the borrower makes interest-only payments. Once the construction is complete, the construction loan is rolled over into a conventional mortgage.
In some states, it is required to have an actual licensed General Contractor in order to secure financing from a bank, but there are ways around this.
Certain Banks are more accepting when it comes to Construction Loans
If one bank says no, try another. Not all banks have the same rules they have to follow.
Start with smaller Credit Unions as they may have more flexibility in this area.
Farm and Ranch type lenders may also be more amenable to loaning to you without a licensed builder on record.
Here are some specific banks where you may have more luck getting a construction loan without a General Contractor:
Where there’s a will there’s a way
Take a Course
Ask the bank if you as an owner could take an owner builder course and replace the GC. Our Bootstrap Builders Guide (coming soon) provides everything you need to be your own GC and manage a construction project with a step-by-step process, and video guidance for each step to help you stay on schedule and avoid pitfalls.
Friend or family
Do you know a licensed contractor who could be the contractor on record as far as the bank is concerned? If so, start there and let them know that you would be doing all the work and assuming all the responsibility and liability, including carrying insurance. It often doesn’t need to be a person licensed as a General Contractor. Some banks will accept even licensed plumbers or electricians as the contractor on record.
Hire a Consultant
Sometimes a GC will consult on a project for a fee. Many builders will charge between $3,000 and $5,000 for their service as a construction consultant. This will still amount a to huge savings for you. Keep in mind a consultant does not replace the liability that a GC takes on. This is still your responsibility lenders will ask that you carry your own insurance and liability on the project. Check with your lender to see if this option would work.
Enlist a Company
Finally, there are companies who are set up to basically go on record as the GC for the bank, they usually will have some other offerings to support your building process. The fee is usually about 3%-5%. Still much better than 15-25%! Some examples of these types of companies you may look for in your area are Owner Builder Network, and U Build It.
When all else fails
If none of these options work, you can skip the bank financing and fund your build another way such as funding from your own savings/sale of previous home, family loans, take it slow and pay as you go, etc.
Don’t give up
Remember: Everything is figureoutable!
Being a self-contractor is extra work, but if you’re willing to put in some effort and time, your could build over $100,000 in wealth while making your dreams come true!
Here’s a few comments from others who have done this!
If you’re interested self-contracting check out these posts:
For those of you who are new to my page, Hello! I’m Jessica, wife to Cody, and mom to 2 boys and a girl, who are SO lucky because everyday with me is like an episode of carpool karaoke! They get a ride and a show! (OK, so I’m not a great singer, but do have enthusiasm). I have a background in architecture and designed this home that we just built in a small Texas town. We self-contracted the build, and now I’m working on a guide to help other families do the same! Most days you can find me on Instagram @the.old.barn