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Are Mortgage Insurance Companies Affecting Your Owner Builder Construction Loan? (financial coach)

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By Chris Esposito

 An owner builder construction loan, just like any construction loan, will not have any mortgage insurance payments while you build. So, why is it then that mortgage insurance companies are having a huge impact on your ability as an owner builder to secure your loan? The answer lies within the banks’ rules for converting you to permanent financing once the home is built.

Even though an owner builder loan has no mortgage insurance to worry about during the construction phase, the lender has to have a plan for when you are done building your home. They need to know that there is a way to secure financing once the home is built. Otherwise, the construction lender will be stuck holding the mortgage and unable to free up enough capital to lend to other owner builders. In fact, the best owner builder construction loan programs are designed to convert automatically from construction to permanent financing without making the borrower go through two rounds of closing costs.

Therefore, construction lenders have to take the permanent loan into consideration when qualifying a borrower for the construction phase. And, thus, the mortgage insurance guidelines that apply to permanent financing will greatly affect the construction loan, whether it’s for an owner builder or for someone who has hired a general contractor.

So, what are the recent mortgage insurance guidelines that are reeking havoc on banks’ ability to provide loans? Let’s start with the basics. Mortgage insurance companies provide a safety net to banks in the events that the borrower does not make payments on time - or at all. Therefore, banks do not like to lend money without having mortgage insurance in place.

In the past, an owner builder lender, just like other banks, could easily purchase mortgage insurance for its loans. The mortgage insurance companies had very lenient guidelines on what was required to get a mortgage insurance commitment. However, with all of the foreclosures that have been dumped on the market and all of the people having trouble making their mortgage payments on time nowadays, these mortgage insurance companies have come up with some stricter guidelines to protect their investment in the loan.

For example, let’s say you are an owner builder who wants to build his own house for his family to live in. Even though there is no mortgage insurance during construction, the owner builder lender will want to have a permanent loan lined up for you so that you can move into your new home once construction is complete. Even if a bank is willing to lend money based on their set of guidelines, they still need to acquire the mortgage insurance commitment for the loan. If the mortgage insurance company has stricter guidelines than the bank, then the bank will have to default to the stricter requirements in order to get the mortgage insurance commitment and fund the loan.

Looking back to the example of our owner builder construction loan, the bank might be willing to fund your loan based on the fact that the value of your future home is going to be well above the total cost to build. In other words, when you’re done building as an owner builder, your total loan amount will be less than the appraised market value of the home. For example, the bank might be willing to fund the construction loan based on the fact that your total loan amount will be 90% or less of the future appraised value.

In this way, the owner builder lender can say to the borrower that no cash is needed out of pocket. Indeed, the lender is willing to treat the future equity in your home as a replacement for a down payment. But, if the mortgage insurance companies refuse to provide mortgage insurance without seeing some cash into the deal from the borrower, then the lender is forced to tighten their requirements to meet the mortgage insurance company’s guidelines.

Owner builder construction loans have certainly fallen victim to these tightening guidelines, making it difficult for them to provide financing without a down payment. So, what’s the solution? Really, there are only two basic ways to work around this. One way is to simply require the owner builder to bring cash to closing for the construction loan. The second way is to try to lend without mortgage insurance.

The only way to avoid mortgage insurance with most lenders is to have a loan that is less than 80% of the appraised market value of the home. In the lending world, this typically requires a 20% down payment. But, owner builder construction offers a unique way to achieve this without putting 20% cash into the project.

Instead, the owner builder can create 20% in sweat equity while they build their home, saving money by eliminating the general contractor and doing some of the labor themselves. Therefore, when an owner builder finishes construction on his new home, it is not unreasonable that there will be 20% or more in instant equity built into the home.

If owner builder construction loans can finance the construction based on an approved budget that shows that the permanent loan will be no more than 80% of the finished appraised value, then these owner builder lenders do not have to get a commitment for mortgage insurance. If there is no need for mortgage insurance, then the lender can fund owner builder loans without having to adhere to any extra requirements from the mortgage insurance company.

Because owner builder construction loans typically have their own minimum construction budget requirements, it may be tough for a borrower to get a budget approved at the 80% level. In some cases, the owner builder will still have to bring some minimal amount of cash to closing to make up the difference. But, even in these cases, it is a far cry from the larger requirements from the mortgage insurance companies. This is something every owner builder can be grateful for.

Chris Esposito provides owner builder construction loans through Owner Builder 101, a program designed specifically for someone who wants to build his own home without paying the costs of a general contractor. For more information, please visit www.OwnerBuilder101.com, or call (877) 876-3688.

Protecting Yourself with Asset Protection
By Shawn Burgy

 

Protecting Yourself with Asset Protection:

Whether it be Asset Protection or Asset Allocation.
Managing your finances should be a priority.
You need to be aware of your rights and safety’s that you may find.
One needs to keep an eye on things as personal property.

One may be looking to protect themselves during a divore or other unforeseen occurrence.
These occurrences may come up at the worst of times.
Like most things in life, That is usually when they happen.

There are legal means that you may be able to take in your state or jurisdiction to control these unforeseen events.
Knowing that you have rights and what they are can be categorized as an Asset Protection .

Knowing how to do these things can be called an Asset Management or Allocation.
The more you know about your rights in these instances can protect you from possibly losing your home.
Or worse yet everything that an Attorney can get there hands on.

Asset Protection and knowing how to implement it can save your life.
You can use Asset Protection to make sure that your Asset’s arent taken from you.
These can be from lawsuits, Medical bills.
Even if you were to have to go to a nursing home, Your assets would be protected.

It would be better to start protecting your family and assets now than later.
You’ve worked years to get what you have now.
Don’t let anyone or thing take it or remove it from you.
You have rights, The sooner you know how to implement them the better.

You don’t have to be or have an Attorney to use these rights either.
Common sense and the right frame of mind and information will help you here.
Start protecting your family and assets today.

A good professional lawyer can tell you, Asset Protection is important.
Don’t put your asset’s and family at risk.
There are many trusts and other ways to protect yourself with Asset Protection.

Tangible asset’s and protecting them should be your first priority.
Don’t make yourself and family suffer because you have not protected yourself.

Only you can take the needed steps and learn what is needed to protect yourself and your assets.
Don’t be a none doer, Be the person that says I know what I’m doing.
I’m going to protect myself and my family now.

Protect your family and Asset’s today with Asset Protection Information

Your Source For Business Coaching And Financial Mentoring

Asset Protection Know Your Rights
By Shawn Burgy

 

Asset Protection Know your Rights::

Asset Protection and Asset Management and it’s allocation.
It’s very important that an individual or a sole proprietor know there rights over there asset’s.

Don’t be fooled by what some say you can and cannot do.
Be sure the information you are receiving will actually help protect the asset’s of you and your family’s finances.

Don’t make some mistakes that can be made when it comes to protecting yourself and your family.
It is so very important that you know your rights.
You need to learn how to use your rights to protect your precious property and finances.

It would be so easy to loose everything if you have not taken steps to protect yourself.
Anything could rise up and hurt you and the rights of your household.

Make the right choices to protect yourself now, Not later.
Sad to say that later could be to late.
Don’t be the one that waits to long.

Asset Protection can help you allocate your assets and stay safe.
Be the safe person not the sorry soul who losses everything.
Why do that when you can protect yourself.
Learn as much as you can about Asset Protection and helping yourself.

Only you can make the wise decisions and be your own judge.
The courts don’t want you to know how to protect yourself.
They don’t want you to know that you can protect your asset’s.
The courts are being paid to keep you in the dark.

When they are receiving revenue from you loosing your personal property.
They don’t want you to know that it can be avoided.
That’s right, There making money when you loose your possessions and your home to foreclosure.

There sitting at your knees foaming at the mouth to get at you and your money.
Don’t be a statistic, Let Asset Protection help you now.
Please, Don’t let them take you to the cleaners like they have so many before.

Do something about it.
Use Asset Protection to protect your finances and asset’s today.

Protect your family and Asset’s today with Asset Protection Information

financial services coach

Saturday, September 27th, 2008 at 11:00 am 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.