Owner Builder Credit Scores and the Effect On Financing Fees (entrepreneur organizations)

November 23rd, 2008 admin Posted in finance |

By Chris Esposito

Owner builder construction loans have become harder to find as the mortgage industry has all but done away with these highly specialized products. The owner builder programs that remain strong are using the industry titan, Fannie Mae, for rates and pricing. How does this affect you? Your loan will have higher financing fees (discount points) wrapped into it if your credit score is not strong.

In the world of owner builder construction, the borrower already expects to pay more for the loan than he would expect to pay for a typical construction loan or certainly than a simple purchase or refinance mortgage. In fact, these higher costs are not of utmost importance, because they are offset against the hardy amount of savings that an owner builder will earn by cutting out the costs of a general contractor during construction of the new home.

However, every little bit helps. And, if an owner builder can avoid additional fees that come with lower credit scores, then it will help to maximize the amount of sweat equity that gets built into the home. Obviously, the borrowers with FICO credit scores above 740 will have nothing to worry about. It is the borrowers with credit scores that fall below 700 especially that will need to be prepared to wrap additional discount points into their loan. So, let’s take a look at why this is happening, and then determine if the construction is still worth the extra fees.

The bulk of the remaining owner builder construction loan programs across the country are selling their end products to Fannie Mae, the mortgage industry titan who stimulates lending by purchasing bundles of mortgages from banks. This is not unusual. In fact, it’s the typical outlet for most lenders in the U.S. The issue for owner builder loans, though, is that Fannie Mae has set some strict pricing guidelines that correspond directly to the borrower’s FICO credit score and loan-to-value ratio.

With owner builder construction, the borrower typically builds his home for less than 80% of the house’s appraised market value. Therefore, when looking at Fannie Mae’s guidelines for pricing, it is very helpful that owner builders don’t have to concern themselves with any loan-to-value ratios above 80%. This truly saves them from a lot of the higher pricing tiers.

However, it is the credit scores that must be closely observed. For example, using the 80% loan-to-value ratio, a borrower who has a credit score below 700 can expect to wrap one extra discount point into their loan. If your credit score is below 680, wrap an extra 1.75 to 2.25 points into the loan. One point is equal to one percent of the loan amount. Therefore, if your loan amount is $200,000, then wrapping an additional 1.75 points into your financing will mean a loss of $3,500 in equity in your home when it is completed.

So, is it worth it for an owner builder with a lower credit score? The answer to that question depends on the amount of equity that he plans to save during construction of his home. For example, on a $200,000, you may save $40,000 by eliminating the costs of an owner builder and managing the project yourself, perhaps even doing some of the minor parts of the labor. In this case, the extra $3,500 wrapped into your loan amount shouldn’t make a big difference to you.

It is important to note that these owner builder construction loans make allowances for a borrower to wrap these fees and closings costs into the loan amount, so you won’t have to pay them out of pocket. In the example above, the extra $3,500 in discount points that occurs due to a lower credit score will not mean that you must pay an extra $3,500 at closing. It simply means that an extra $3,500 is being financing for you. In the long run, you can equate this to $3,500 less equity that you get to build into your home by being an owner builder.

In addition, the extra fees may be well worth it to you if the owner builder construction loan has a one-time-close feature, meaning you won’t have to go through a second round of closings once your home is built. If you can convert straight to your permanent financing without having to worry about a second round of closing costs, then the extra fees in the one-time-closing are not overly troublesome. For an owner builder about to save a lot of money during construction, the financing program that allows him to do so will still be well worth it.

Therefore, if you are considering applying for an owner builder construction loan that will allow you to build your own home without requiring a general contractor, be prepared to have higher costs associated with the loan than you would have if you were buying a house or using a fully approved builder for construction. However, remember to look at the big picture and calculate the overall reward of the substantially lower construction costs for owner builder projects.

Article Source : Article King Pro - Free Reprints and Distribution

Chris Esposito provides owner builder construction loans through the Owner Builder 101 program, designed to help you build your home without paying the costs of a GC. For more info about the process and financing for an owner builder, go to www.OwnerBuilder101.com, or call (877) 876-3688.

Recession Kicks In For Brits Struggling To Save
By Abbi Rouse

More than 20 million Britons lack the funds to put money aside during the current economic downturn, AXA has claimed.

According to the insurer, this proportion of people have resorted to whittling away at their savings since the beginning of the year, while only the top 20 per cent of wage earners throughout the UK have been able to avoid spending beyond their means.

The group insisted that new savings ratio statistics showed that the minimum income on which people can put money aside now stands at 70,000 pounds, equivalent to 52,785 pounds after tax and benefits.

Furthermore, it noted that in the wake of the global credit crisis, it is important for consumers of all income brackets to be able to rely on sound financial practices which will help them to stay afloat as the economic storm clouds gather.

Only with tangible solutions to financial hardships will consumers be able to overcome the anxiety of entering a recession, AXA claimed.

As such, the group invited people to take part in the annual My Budget Day, which aims to raise awareness of the importance and effectiveness of setting out a firm financial roadmap. Taking place on November 20th, the event will have particular significance in light of recent financial turbulence, the insurer said.

Commenting on the current problems facing “real Britain” today, Steve Folkard, a spokesperson for AXA, warned: “If only the richest members of society are managing to cope with their spending then we really need to consider how to improve the day-to-day financial health of British households.

Talking about global issues is important but they need to be put in perspective with tangible solutions being offered to individuals. People are anxious about how to deal with their finances. You need to get into the habit of regularly reviewing your financial situation and My Budget Day is about kick-starting that habit.”

He added that people only need to spend an hour each month reorganising their finance and in doing so they will be able to put themselves on a much firmer footing. However, Mr Folkard claimed that currently, many Britons feel at a loss as to where to turn to for financial support.

He warned that while many people are feeling the pressure, those who do not pursue a remedy could end up feeling disengaged and dejected, which in turn could lead to further financial problems.

For consumers who have seen their fiscal fortunes fall by the wayside in recent months, taking out a debt consolidation loan may prove an effective way to extend repayment commitments and boost monthly disposable income.

Meanwhile, for those who have found their access to money dwindle as the crunch has rumbled on, applying for a bad credit loan may allow them to begin making regular repayments and repair their credit history and get back on better terms with their creditors.

While more people may have been feeling the pinch since the beginning of the year, childrens charity Ray of Sunshine has recently claimed that one upside of the economic turbulence has been that families and communities are now becoming more close-knit as they try to do battle with the crunch.

Abbi Rouse writes for All About Loans. Our visitors can apply online for bad credit secured loans. We also specialise in the cheapest loans online, and UK consolidation loans.

How Many Ways Can Your Family Save Water At Home
By Aydan Corkern

Do you ever give much thought as to how much water you and your family actually uses everyday? Do you even care if you are wasting a large percentage of water in your home just because you do not pay attention to how long you let the faucet run when you are doing everyday tasks? You would be amazed at how many gallons of water you could save everyday if you did pay a little more attention. You should do this no only because it is good for your water bill if you have one, but more importantly it is better for our world.

We waste water like we have a never ending supply and up until now we have had all that we cared to use, but in many parts of the world the luxury of having clean water for drinking and everything else is becoming a hard thing to find. Children are dying in some places because the water they do have access to is far away and they have to travel far distances each day to get it and even when they do, chances are it is not fit for human consumption when they do.

For those of us who do have plenty, even we should not take it for granted. Some states out west are having trouble getting enough to supply their needs and are actually having to do battle with other states to tap into their supplies. It has begun to get a little ugly in some cases. The people who live in these areas where fresh water is becoming scarce have started to realize how important conservation is and how precious a commodity like water really is. When you turn on your tap and nothing comes out, that is a definite reason to worry.

Here are just a few ways that your family can help do your part in conserving water:

1. Do not run water while you brush your teeth.

2. Take baths and showers with less water

3. Do not water lawns or wash cars unless it is necessary.

4. During dry spells do not water lawns or wash cars.

5. Keep a filled water pitcher in the refrigerator so the faucet does not have to be turned on and off.

6. Check you home plumbing, pools, or fountains for leaks.

7. Collect rainwater for yard and plant watering.

Just by doing these few simple things you can be assured to save a lot of the water that can be wasted in every home. You will feel much better knowing that your family is doing their part now to save water and you are teaching your children to conserve in future generations.

Aydan Corkern is a writer of many topics, visit some of her sites, like

water damage chicago and water damage restoration milwaukee.

Your Source Online For Entrepreneur Listings