Well, that may be how it used to be done and nothing says it can't be done that way now, but in today's building economy, I might err on the side of caution. Alot of builders are hurting & some are behind in payments on other projects. You are going to want to do everything you can to protect yourself & your $$$. As far as the construction loan goes, if I'm not mistaken, you and the builder would get roughly the same rate on the construction loan so there's no savings to be had there. The "savings" he is likely talking about comes from the fact that he is making the monthly interest only payments & you're not having to front that every month as the house is built. But trust me, he will get that money back with interest--so there's really no savings at all and it will probably end up costing you more. If you get the loan yourself, you will be responsible for paying the monthly payments. (Average construction interest in my area = 5%. To figure your payment-which will change monthly-you take the total amount drawn off the construction loan to date, multiply by the interest rate & divide by 12. It's not until you get toward the end of the build that the payments really get up there, but remember you are still only paying interest-no PMI, taxes, or prinicpal). As far as that 15% downpayment goes, depending on the type of contruction loan you get, you may have to front that 15% to the bank and they would make those funds available during the draw process. This helps protect you & the bank as the builder doesn't have direct access to the funds anytime he wants it--the bank will have to come out & make sure the work has been done to a certain level/percentage of completion and only then can the funds be released. There are typically 4-6 draws on an average construction loan. From the builders' point of view, if he gets the loan & you front him the 15%, he knows he has funds readily available so he can pay subs and stay ahead of the game and not have to wait on the bank. It may also allow him to get discounts from the subs on labor costs if he pays them in cash from your 15% as the job is done or on a weekly basis. My question here would be--will those savings be passed on to me as the buyer? What type of building contract are you going with--cost plus, fixed price, etc? If I was putting my 15% up front then I would want control over it--I get a copy of the invoice (sent US Mail) & I cut the check to the sub directly. As you submit receipts to the bank, those funds get "replenished". There have been too many cases where the builder uses the funds for something else and subs don't get paid in a timely fashion or even at all resulting in a lien against your house. Now I'm not saying your builder would fall into this category, afterall I don't know him. But it just makes sense to be cautious expecially in today's climate. I would be very curious to know why he "wants to move super quick to get things started (something about a permit possibly expiring)". Does he own the lot the house will be built on? If not, what permits has he already pulled on a build he doesn't have a signed contract for yet? This doesn't make sense to me. If he doesn't own the lot, he may just be trying to rush you into a decision. My advice is don't rush into anything. Make sure your attorney reviews any & all contracts the builder wants you to sign. Make sure your attorney and his attormey are not one & the same--you need your own to protect your interests. Make an appointment to talk to some different lenders in your area about your loan options and their requirements-don't let anyone pull your credit report until you know you're set & ready to pull the trigger-no sense in dropping the credit score prematurely which can adversely affect your interest rate. While you're talking with the lenders, ask if they have dealt with this builder before or have had clients who used this builder and what their experience was with him. (I didn't know this one until the other day when my lender said he was going to ask around his banking friends about our builder to see if he tends to run over budget on his builds--sign of lowballing the bid to get the contract then springing the real cost on you at the end when it's way too late, differences of opinion on what is owed him, any complaints from subs not getting paid, etc). You may also want to do a search on GW about building contracts--there is alot of great information on here with specifics on how you can help protect yourself & your pocketbook. Make use of your banker & attorney to help protect your interests as well. Good luck to you & congratulations on starting a new house!

I guess I qualify as an OB now although I didn't start out that way. We wound up firing our contractor halfway through the job due to his massive incompetence and dishonesty. It then took us several months to convince our bank to let us finish the job ourselves rather than risking getting involved with another crooked builder. Being a general contractor is far more about project management than it is about construction. The GC lines up sub-contractors, makes sure they show up and do the work they're supposed to, handles paperwork, and makes sure everybody gets paid when they're suppoesed to be paid. Many GCs probably couldn't hammer a nail in straight if they had to. To be a GC you need business skills and project management skills, and you need to know (or be willing to find out) what a construction job should look like when it is finished. It helps in dealing with subs to learn the lingo but you don't have to be able to hammer, saw, hang sheetrock, run electrical lines, or anything else. If you OB, plan to spend at least 20 hours per week and possibly more than that on the job. I just WISH we had just gone the owner-builder route right from the start. Neither DH nor I have any construction experience whatsoever but we had looked into being our own general contractors before we hired our builder. We even took a class on building your own home but then decided that we just didn't have the necessary time to devote to the task. Was that a mistake! I had done my homework and had spent a huge amount of time on this board before we ever broke ground - so I had a good idea of what to look for in quality work. It quickly became evident that my builder didn't have a clue and apparently he couldn't have cared less. His subs were obviously the cheapest he could find and often, I suspect, were undocumented day laborers. They didn't follow installation specifications for installed materials like Tyvek sheathing, my Jeld-wen windows, or the roofing shingles. I know because when things didn't look right to me, I got the specs from the manufacturers and checked their work myself. They also often didn't follow building codes - which I found out because I had put it in my contract that I would separately hire a third-party inspector to inspect all stages and that any work not meeting code would have to be redone at the builder's expense. The framer hired by my builder used I-beam trusses between the first and second floors instead of the open-web trusses I had specified. The framing was completed while I was out of town for two weeks and by the time I got back, the house was already sheathed and the roofer had started work. So it was too late (eg., economically unfeasible) to make the builder have the entire roof and second floor taken down so that the right trusses could be put in. My plans called for the HVAC units and all ductwork to be within the heated/cooled envelope of the house. When I demanded that my builder check with his engineer to ensure that holes could be cut through the i-beams large enough to accomodate the HVAC ducts, he assured me that would be "no problem." That was a lie. Even the holes that had to be cut through the i-beam trusses for plumbing drain lines weakened them enough that my third-party inspector insisted that extra trusses be installed to bear part of the load. No doubt putting those in was a major expense that the builder had to eat. There was no way HVAC ductwork could be run between the floors as designed. Instead, the HVAC units were put in the unairconditioned attic along with massive amounts of flexible ductwork. Instead of an attic that could someday be finished out to add a couple more bedrooms, I have two big HVAC units and what looks like a massive silver spiderweb totally filling the attic space. I also lost closet space in all my bedroom closets because ductwork chases down to the first floor had to be put somewhere. When I exploded about the lost usable square footage and the additional on-going costs associated with having the HVAC and ductwork up in the attic (we live in central Texas!) my builder tried to tell me that EVEN IF the framer had used open-web trusses, the ductwork still would not have been able to be run through the trusses and that "everybody puts HVAC units in the attic." DUH? Open web trusses are designed to allow ductwork and plumbing to be run them!! Had the man NEVER read anything about energy efficient building practices? Nope. He just trusted that his framer - who hardly spoke English - knew what he was doing. Despite all this, my builder kept telling me that he was a "professional" and that I should just relax and let him do his job. HAH! I can't think of a single task that ever he actually handled completely correctly from start to finish. Then, shortly after the HVAC units were installed, I got hit with a $54,000 lien because builder had not paid for my windows and patio doors even though he had been given draw money specifically for that purpose! That lien was immediately followed up by threats of two smaller liens from two other subcontractors (the portapotty provider and the exterior paint contractor)! And the builder admitted he didn't have the money to pay any of the three. At that point I was more than ready to fire him but my bank insisted that I could NOT do so. We paid off the liens and the unpaid subcontractors and I took over handling ALL monies and paying the subcontractors and suppliers directly instead of having draws go to the builder to pay them. No more money was going to flow into the builder's hands until my house was completed, at which point anything that was still left of the original contract price would be his "profit." By that point, the only thing the builder was doing was hiring subs and ordering materials. I was paying a third party inspector separately to check all work that I didn't feel competant to inspect myself. I was handling all the paperwork and making sure everybody got paid. But then the kicker... I discovered that builder was having materials delivered to my build - which I was paying for - and then having his subs (whom I was also paying!) move them to a spec house that he was building and install them there. I had had enough. I fired him. After taking over as GC, I had to spend as much time/effort on UNDOING some of the mistakes he made as on moving forward to finish the build. And the money he wasted/stole from us has forced us to cut back on the level of finishes that we had originally planned to have. My advice: Go take a course on building your own home. Spend time reading and learning everything you can about the building process. Learn the language. If you are reasonably intelligent and willing to devote the time, you CAN build your own home. Plus, there are businesses (Owner-Builder Network and UBuildIt.com are two that I know about although I've not used either one) that will help you by providing you with pre-vetted lists of sub-contractors and guiding you step by step through the process. If your state or your bank requires you to have a licensed builder, these organizations will be the builder-of-record for you. Of course they charge a fee for their services. I don't know how much but it is significantly less than a builder's profit margin. You can also hire a third-party inspector to make sure that you're getting everything built to code. Just make sure that all your subcontractors know that they don't get paid until your third party inspector signs off that the work is up to code. I designed my plan myself and I would love to see the house built as designed. The house we are in the process of finishing will eventually be "okay" but it will never be the house I dreamed of. So there is some chance that when we get this house built we will sell it and rebuild the same design in a new location. But next time I will definitely OB from the get go.

I did a spreadsheet with all my expenses as an owner/builder. Adding up what I paid for what you are getting, it came to around $11K. Since prices are a bit different in your area and you still have demo to consider, you could probably do it all for around $15K. That gives you plenty of room for upgrades :)

The OP risks his funds paid for the lot (and the lot too) if he deeds the lot to the builder and the builder is unable to finish The OP says, "One builder, who does a lot of spec houses, it looks like, said that his company would buy the lot, not us, and we would have the usual construction contract for a house that his company would build." Even if that were not the case it wouldn't necessarily be a problem. While not a common arrangement it isn't uncommon either, you just use an addendum to modify the quitclaim during breach or at the termination of the contract. Commonly the builder will accept a contingent quitclaim such that the deed only transfers if the buyer refuses to make final payment. It really isn't that unusual and I can't see any situation that an attorney would let you get into the situation you are suggesting. -------------- ETA: I did an addendum for a quitclaim on some property. I have a farm in an area that requires 10 acres to build (they are attempting to keep the area horse farms). We wanted to give the foreman an acre to build a house close to the farm. So we sold him one acre and quitclaim nine more, attaching an addendum that the quitclaim would reverse in two years unless he paid us a fortune.