Sunday, October 28, 2007

Permits approved, bids getting worked on, and more about how owner building works...

After some leg work, I got all our permits approved!!! :-) Celebrate! We can actually start building once we get our bids for the various parts of the house (foundation, framing, materials, plumbing, electrical, etc.). We have been working really hard the past 3 weeks getting our houseplans and structural engineering plans printed and distributed to all the various subcontractors. You have to be on the phone a lot and do a lot of follow up calls!

Since we are owner builders, we can opt to choose U-Build It's contractor list or get subcontractors of our own (or pick and choose which ones we want to get on our own), which is great because we can vet the people ourselves and put more money where we want to. This is the biggest advantage of being an owner builder since you can control costs and quality much more closely than if you rely on a builder to do it. I have heard horror stories of people who give too much trust in their builder and that builder turns around and cuts corners where you don't want them to. In some instances, you're paying them 20% of building costs to basically just write out checks and little more than that.

Here are the categories of contractors. You may have more or less than this list:
  • Foundation
  • Materials
  • Framing
  • Windows
  • Electrical
  • Structured Wiring
  • Garage Doors
  • HVAC
  • Plumbing
  • Roofing
  • Roofing Supply
  • Drywall
  • Paint
  • Cabinets
  • Flooring
  • Glass/Mirror
  • Front Door
  • Masonry/Stucco
  • Stairs
  • Pool builder
  • Steel fabricator (for stair cable railing)

After getting our bids, we have to decide which subcontractors to go with, create our budget and then submit that to the lender doing our construction loan. We, by the way, haven't selected our lender. You will have to prepare documentation for your loan (called "full doc"), such as pay stubs, tax returns, stock/bonds and account/retirement statements. In today's market, you have to do "full doc" to get the best rate possible. Banks and lenders are being more stringent in lending out money than ever before.

When you owner build, part of what you pay for when you sign up with an owner builder program is the support you get when obtaining a construction loan. I believe there is a law in Texas that says that you have to be a registered builder to do your construction loan, and so that's why we had to sign up with U-Build It. The lender (whom we haven't decided on yet) will then get an appraiser to look at all our plans and do a house appraisal. Based on the house appraisal, credit history and income, we will get approved to loan a certain amount for the construction loan.

During the construction of the house, you will get guidance by U-Build It's consultants and their builder's manual on how to schedule the construction project. You write the checks, you decide the subs, and you must do daily site visits, as you are replacing the builder's (a builder is also called GC for General Contractor) Building Supervisor. You will have plenty of inspections (by the structural engineer for the slab, third party inspector, bank inspector, and owner builder inspector) at various phases of construction and THIS IS VERY IMPORTANT. Make sure the appropriate inspections are done at the specified time, especially before and after slab pour (your foundation). This is all detailed out in your builder's manual, which is provided to you by your owner builder program. Even if you were going with a builder, it is still good to know these details, as you need to keep an eye on your GC and make sure s/he's doing these steps. It's always good to "trust but verify" as Reagan says, probably the only good Republican quote I'll ever use :-).

It does seem like a lot of trouble, but is worth it to us, because as future home owners for our first house, we want to be totally involved, probably much more than most. It's always good to be ahead of the game, as well as always well informed, whether you go with owner builder or a GC (builder).

During construction, you are paying a higher construction loan interest on the money you draw. Usually, this term is up to 12 months. Once construction is over, your construction loan gets converted to a mortgage loan. As far as we're concerned, we want to shorten the construction as little as possible. We have been told that our house can be ready in 6 months, even faster because we are going with SIPs that can be prefabricated at the manufacturer's. That would be great, as the pool can be ready for the summer time! We hope to break ground end of November/December. As always, I'll keep you posted!


Anonymous said...

Construction loans are expensive compared to the permanent financing, and often there is some room for negotiation. Lots of lenders actually charge points on the construction loan. At least ask if they can't waive any points.


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