(Financial business coach) Owner Builder Loans - Everything You Need to Know About Credit Scores
No commentsBy Chris Esposito
With all of the recent changes in the mortgage industry, it can be tough to keep up with the different requirements for the different loan programs available. Owner builder construction loans are probably as complex as residential mortgages can get. But, there are some simple rules about your credit scores that can make understanding the owner builder guidelines a little easier.
The first rule of thumb for an owner builder construction loan is that you will want to have a credit score of at least 620. Obviously, the higher your credit score is, the better it will be for your loan. However, if you want to be an owner builder to build your own home, then you will need to have a middle FICO credit score of at least 620.
Technically, for most owner builder loan programs, there is no strict minimum credit score requirement. In most cases, your loan application will be run through an automated approval system, which will analyze your overall risk factor. However, even without a strict minimum, you most likely are not going to get the approval through the computer system without at least a 620 score.
Along those same lines, an owner builder may not get approved for their financing even with a credit score above 620. In addition to analyzing your credit score, the approval system will also examine your current credit health. In other words, if you don’t have any current, healthy accounts that are at least one to two years old, then having a credit score above 620 probably won’t be enough to get your approval.
Likewise, owner builder construction loans are going to provide better rates in terms for borrowers with higher credit scores. Specifically, having a credit score above 700 will help you get the best rates and terms available.
It is important to remember, though, that a strong credit score will not assure an owner builder of getting approved. In other words, an owner builder with a strong credit score is not going to get through underwriting if he has too low of a documented income or too much debt. Furthermore, a strong credit score won’t be enough to get the loan approved if the project has a poor appraisal or an unrealistic budget. Therefore, a good credit score is just one piece of the puzzle for a strong owner builder file.
In fact, here are some of the specific advantages of having a higher credit score when applying for an owner builder construction loan:
1. An owner builder who has a high credit score can often get approved with less than the normal amount of savings in reserves.
2. If you have a credit score above 700, you will have a much smaller down payment requirement for an owner builder construction loan.
3. Also, an owner builder with high credit scores will get better interest rates as compared to someone with just average credit scores.
So, even though a having a credit score won’t get an owner builder approved if there are other glaring issues with the file, it will certainly provide the three advantages listed above.
Therefore, if you are considering being an owner builder, make sure you have a middle FICO score that is at least above 620. If your score is just barely over the 620 mark, then expect to have stricter down payment and interest rate requirements for your owner builder construction loan. So, if you have a limited amount of savings in the bank, you may want to work to get your credit scores above 700 before applying for an owner builder loan.
Owner Builder 101 and Chris Esposito provide loans for people who want to build their own home without paying the costs of a GC. To learn more about owner builder construction loans and how to save tens of thousands of dollars, visit Owner Builder 101’s website or call (877) 876-3688.
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Why Goals Fail - New Research
By Ann Marosy
There are two reasons why goals fail or we give up trying to achieve a specific goal. When I first learnt this, I knew I finally found the Holy Grail of goal achievement.
The first reason is the “Brick Wall”. Often if we make an attempt or several attempts at achieving a goal, we can hit what they call, a Brick Wall. That is often the main reason for failed goals. Too many failed attempts at reaching for a specific goal will stop us from reaching again. To overcome this, write down all the times you attempted a goal and why it failed. By identifying the causes, and by bringing them into your consciousness, as opposed to having them lie dormant and a hidden hindrance, you can then analyse the past reasons of failed attempts and start to think laterally about how to retry and this time achieve them.
The second reason is the “Unrecognised Goal”. Yes, sounds simple enough. But when we have too many unacknowledged goals in our past, we lose sight of our innate ability of great achievement. Our subconscious finally gives up. What we have to do is list all of our past goals THAT WE HAVE ACHIEVED and make a big deal about it. Yes, pat yourself on the back, go out and celebrate each achievement, acknowledge yourself for work well done. When I finally did this, my whole world turned around. And now, every time I achieve a goal - no matter how small - I make sure I congratulate myself in some way. Reward yourself, make it a real celebration. It works! Our subconscious fine-tuning needs this subtle but extremely important ongoing support.
ESTABLISHING A GOAL
To set a goal, it must have all of the following attributes to be successfully achieved:
1. It must be inspirational. This is probably the most important of all. The goal had to be inspirational to us, not someone else - but to us alone. It must make us leap for joy at the thought of achieving it. Make our hearts race at the mere thought of it. The more inspirational the goal is to us, the more easily we will achieve it.
2. It must be achievable and realistic. Although it is great to stretch our imagination a little, if the goal is subconsciously too unachievable or outside our mental boundaries of reality, we are less likely to attain what we want.
3. It must be specific. If the goal is vague or has no timelines, it lacks the motivational force for our subconscious to follow it through. A goal should always be quantified in terms of what, why, how, and especially when.
4. It must be measurable. If our goal is measurable, it enhances our ability to create feedback mechanisms to monitor, control and correct the process of achieving it.
5. It should be long-term. Yes, long-term rather than short term goals are better to achieve. Sorry to disappoint you, but the long-term goal, as unenthusiastic as that may sound, has the most meaning and most benefit to us. Short term goals, whilst easier to achieve, have a short term fulfilment effect. It’s like a quick shot, a bubble that bursts too soon and in the long term, when we tire of the quick fixes, we give up on our real long-term aspirations.
CREATING YOUR GOALS
First of all, write down all your goals for the coming year. If they are long term or may take a few steps to achieve, break them down into Action Steps - smaller, more easily attainable actions with specific dates, and list how they can be measured so you know when you have achieved them.
Secondly, give them a purpose. A wise man once said, “For every goal there must be a purpose, the higher the purpose the more likely you will achieve it”. When we give our goals a higher purpose, we automatically feel more motivated in striving towards it. For example, if you want to achieve a certain weight goal, your higher purpose could be better health and improved fitness that will make you more able and confident to achieve better work opportunities.
And finally, but most importantly, write down your ‘ideal scene’. Your Ideal Scene should describe the final outcome of your goal and demonstrate when you are on target. This ideal scene is one of the most critical steps in achieving goals because it provides your subconscious with a picture to attain.
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Ann Marosy is an accountant, consultant, and former university lecturer. She was formally a Financial Controller of a Fortune 500 Company, and Finalist of SA Executive Woman of the Year.
Ann is the author of ‘The Money Program’ book series, which includes managing the stages of wealth creation, formulas for budgeting, debt-free program and investment strategies. Visit: The Home of The Money Program
The Four Attributes of a Good Owner Builder - Your Construction Loan and Project Depends on Them
By Chris Esposito
Owner builder construction can save you 15% to 35% during the construction of your own home by cutting the costs of hiring a general contractor. However, if you don’t take the planning and construction seriously, then you could end up losing a lot of money and your dream home. Therefore, you need to have these four attributes to be a successful owner builder.
1. An owner builder will need to have strong project management skills. Owner builder construction loans are designed to allow you to act as your own general contractor. That means that you are going to hire your own sub-contractors and oversee their work. Therefore, an owner builder must be able to successfully manage the hiring of multiple sub-contractors as well as manage their labor during construction.
Owner builder construction is simply a long project. And, if you have sound project management skills, then you should be able to manage the construction of your new home. For example, you will need to make sure your sub-contractors show up to work on time, stay through a full day’s worth of work, and actually perform quality work during construction.
Because an owner builder is the general contractor for the construction loan, it will be your job to keep all of the sub-contractors informed about the timeline of the project. For instance, if your foundation is taking longer than anticipated, you will need to let your framing crew know immediately so you can schedule when they need to be on site to start the framing. If an owner builder doesn’t keep the labor strictly scheduled, he will lose precious time and money during construction.
2. A successful owner builder will be good at planning. Most people unfortunately make the mistake of assuming that the most important aspect of owner builder construction is during the actual construction phase. But a smart owner builder knows that the battle is won or lost during the planning phase.
In fact, owner builder construction loans are designed to help you with this part of the process. During the loan and planning stages, an owner builder will take the time to find the right piece of land to go with the right home plans. Then, a budget needs to be compiled based on written bids and quotes from local sub-contractors who have reviewed the blueprints.
If an owner builder fails to take these steps seriously, they will fail during construction. In other words, if you rush through the planning stages, you will have trouble getting your building permits and will lose a lot of time and money in labor and materials during the actual construction.
3. A good owner builder understands the value of follow-up and inspections. If you don’t take the time to inspect the materials that are delivered on site or inspect the labor that your sub-contractors have completed, then your home will be riddled with problems by the time you move in.
This is not to say that an owner builder has to be able to personally inspect the sub-contractors’ labor to ensure it meets specific building codes. That would require years of experience in the building industry, which is not a requirement to be a good owner builder. Instead, you need to take the time to be on site with local county building inspectors.
As each phase of construction is completed, make sure that the county inspectors are doing a thorough inspection to ensure the labor and materials in your home exceed the minimum building code requirements. In fact, you should not pay any of your sub-contractors for their labor until their work has been thoroughly inspected and deemed satisfactory. An owner builder who pays their sub-contractors for labor before satisfactory work is completed will have a very hard time getting those sub-contractors back on site to make any necessary corrections.
4. Owner builder construction requires strong negotiation skills. If you want to save as much money as possible while building your own home, then you will need to be willing to negotiate for lower labor and material costs.
In today’s housing market, an owner builder truly has a great advantage when it comes to negotiating with sub-contractors. A few years ago, sub-contractors were in high demand as everyone was building as many homes as possible. With the current housing market slow down, the construction has also slowed down.
This means that there are a lot of hungry sub-contractors looking for work. This means that a savvy owner builder can negotiate for lower labor and material costs to save as much money as possible. Don’t be shy about it. Remember, the sub-contractors will be working for you - not the other way around.
So, if you want to be a successful owner builder, you will stand a much better chance if you know and fully understand the importance of these four attributes. Notice that not one of these attributes mentions anything about having to be able to swing a hammer or hang drywall. Instead, owner builder construction is won or lost at the planning and management level.
Chris Esposito specializes in owner builder construction loans, helping people act as their own general contractor to build their homes. Visit Owner Builder 101 for more information about owner builder planning and financing. Go to Owner Builder 101, or call (877) 876-3688.
Thursday, August 28th, 2008 at 1:45 pm and is filed under finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
