Borrowers · Texas construction loans
Be your own builder
Construction Financial Solutions is one of the few interim construction lenders who will allow the borrower to act as their own builder if they meet certain criteria. Doing so saves the homeowner builder overhead and gives more control over the completion timeline.
Do you think you have what it takes? Let’s find out.
Experience
Managing the construction of a home involves much more than project management and subcontractor and vendor relations. Residential construction is a complicated process, and the Builder of Record needs extensive knowledge of city and county regulations, utility setup, insurance guidelines, inspections and budget management, as well as construction knowledge. More than paperwork, the person managing the build must be able to walk onto a job site at any time, identify faulty work by subcontractors, and know how to resolve the issues at minimal expense.
For these reasons the Builder of Record must show residential construction knowledge and experience. To act as their own builder, a homeowner must either:
- show they have built homes for clients in the recent past, with client and supplier references, and/or
- provide a work history that supports their knowledge of the construction industry.
Formation
The Builder of Record will sign several of the loan’s legal documents, including a Mechanic’s Lien. These documents must be signed by a company, not an individual. A homeowner who wants to act as their own builder must establish a Limited Liability Company (LLC) or Corporation (Inc.) as the builder with the State of Texas. A DBA or assumed name does not qualify.
The Texas Property Code also requires that funds received for residential construction be kept separate from a builder’s administrative and personal funds. A bank account in the builder’s company name must be in place, and accounting records must keep construction funds separate from administrative costs. The builder’s record keeping must also separate the funds used for each individual project.
Protections
The Builder of Record must have active General Liability and Builder’s Risk insurance policies. If a General Liability policy does not already exist, a less expensive alternative is to add a Supplemental Premises Liability policy to the Builder’s Risk after the loan is approved.
When a homeowner will refinance the construction loan into a VA or FHA mortgage, the mortgage lender will require the builder to provide certain information and documentation on the home, which may include copies of the permit, the Certificate of Occupancy and construction warranties. If the property is inside city limits, the city will have mandatory inspections to support the permits. If the home is outside city limits, the builder will be required to obtain inspection reports at footing, framing and final from an ICC, RCI or CI inspector.
