How To Build A House: The Ultimate OWNER BUILDER Guide!

My name is Case Robinson, and I'm 26 years

old and I've successfully built 2 homes as

an owner-builder and right now I'm

planning my third home build. I've created

this video to be the most in depth video

on YouTube that will actually teach you

how to build your own house. I'm going

to be covering everything from obtaining

an owner-builder loan and getting the

financing you need, to actually designing

the house, to finding and hiring the

the subcontractors and suppliers that

you'll need, to actually building the

house and managing the job site, and then

all the way to the final blue tape

walk-through and final inspection of your

completed home-build. If you're actually

interested in building your own house,

then you should click the link down below,

and check out my digital course where I

teach you everything you need to know to

actually take on your first home build,

as well as I provide ten PDF's and

downloadable excel sheets that will assist

you throughout your first home-build. So

with that said, let's get into the video.

So the very first step in this building

your own house process is figuring out

what I like to refer to as the

"initial idea" , and if you're watching

this video then you probably already have

this initial idea up here in your head,

and that is likely one of the three

options that I'm about to list. Either

you are thinking that you want to build a

house to rent, or you're thinking that you

want to build a house to sell. Or lastly,

and probably most popular, you're thinking

that you want to build a house to occupy

and live in for your primary residence.

Building a house to rent could be building

a single-family property to keep as a

rental property long-term real-estate

investment. Or secondly, you might be

thinking of building a duplex or a triplex

or a fourplex or maybe even a small-scale

apartment complex or maybe even a

big-scale apartment complex to keep as a

long-term real-estate investment property,

and lastly building a house to occupy and

live in for your primary care residence

is obvious, you know maybe you're thinking

you want to build a slightly larger house

than what you live in right now with a

pool, that way you can live there for,

you know, five to fifteen years and have

your family grow into that house. Or maybe

you're like "hey I have all the money in

the world, I have an unlimited budget, and

I'm ready to retire and build my custom

dream-home on two hundred acres, and

wherever that may be. So those are likely

the three options for your initial idea,

and that is the very first set to the

'building your own house' process, just

determining what that initial idea is,

are you going to build a house to rent,

to sell, or to live in as your primary

residence. The second step in the

'building your own house' process is

determining your preliminary budget for

the project, and this kind of depends on

what financing option you decide to go

with on your home-build, and for the most

part, there are two main financing

options. The first one being cash, and

your own personal resources, and then

the second one would be a construction

loan of some sort. Cash, in your own

personal resources, could be considered

a number of things. One,

and most importantly being, cash that you

have in the bank whether that be

in a checking account, or a savings

account. The second option may be a

credit card of some sort that you think

you can utilize on the home-build. Third

option might be just like liquidating some

stocks or something that you're invested

into elsewhere, maybe you have a really

good friend or family member who is

willing to give you money to go out

and build your house, not that I know a

friend that would give me money to go

build my own house, but hey, uh, cash and

your own personal resources is essentially

whatever you have directly available to

you without getting a construction loan,

right. So, I actually built my first two

houses using cash, and credit cards. So,

I've never gotten a construction loan,

but I will, as of right now, I'm getting

one for my next home-build. Determining

your budget, if you're building with cash,

and your own personal resources, is

simply a matter of calculating how much

you have, and then calculating how much

you are willing to take from that and

invest in your home build, whether that be

you are building to rent, to sell, or

keep as your primary residence. Right, so

that is how you determine your preliminary

budget if you're going to finance the home

build with cash. Now, secondly, if you're

considering to build a house to rent, or

to sell, and you're interested in getting

a construction loan, then you can probably

pretty easily obtain a commercial loan

to build that house to rent or sell. You

will notice that building a house to rent

or sell, both have in common that you are

building that project to make money, and

then attempt to make money, and that is

why commercial loans exist. So, if you go

in and meet with a commercial lender, they

give you commercial loans not based on

your income situation, instead they

evaluate the project itself, and they

evaluate the deal, and if you're building

a fourplex, they evaluate all the numbers,

they crunch the numbers on the deal, and

they say "okay this looks like a good

investment, we will give you a commercial

loan, you know, to fund your deal", right

so if you are looking to build a house to

rent or to sell them you can

probably pretty easily get a commercial

loan but maybe we'll talk about that in

another video because I'm sure most of

you people watching this video are

interested in building your own house

to occupy and live in as your primary

residence and the most common type of

loan that you will be able to get,

especially if you are considering building

your own house as your own general

contractor as an owner-builder will be be

what's called an owner builder loan that

is a construction to permanent loan

with a one-time close. There are three

main qualifications when it comes to an

owner-builder loan. Of course these

qualifications are going to vary from

lender to lender but with the lender that

I'm working with currently, I'm getting

my owner-builder loan for the house that

I'm about to build, there are three main

qualifications and they are: a

minimum of a 675+ credit score, secondly,

they approve a 45% debt to income ratio,

and then lastly, they require a 15% down

payment. So, the first one being credit

score, that's a really easy one to check,

you gotta have a minimum of 675, if you do

not monitor your credit as of right now,

then I highly recommend you doing so,

you know, what are you doing with your

life if you're not checking your credit.

There are several free apps that you can

download on your handy dandy iphone or

whatever phone you may have, and the most

popular ones are Experian and credit karma

and you can monitor your credit also

through your banking app I'm sure if you

have something like Chase bank or Capitol

One. Anyways, here's Credit Karma,

Credit Karma shows my credit score to be

right there, 753 and 738 and then on

Experian, a credit score shows to be 771.

Yeah, my credit score is not the best to

be honest with you, because my credit

takes an absolute beating because I

applied for some kind of new credit. Seems

like every two to three months, I'm either

buying a new truck, or applying for a new

mortgage, or getting a new credit card,

or something, because credit is very

important, and credit allows me to do the

things that I'm doing. So with that said,

that is the credit score qualification, a

minimum of 675 credit score. So the second

qualification that a bank is going to

require you to have in order to either

approve, to obtain an owner-builder loan,

is having enough money in the bank to pay

the down payment for the loan, okay, so

let's take a look at a couple easy to

understand examples so you can figure out

how the down payment is calculated, and

how it works. Here we have a total project

cost of $250,000, fairly cheap project.

And if you look, we have two lines, one

goes to the down payment, which you are

responsible for paying, and then on the

right, we have the LTC, which stands for

loan to cost so this is gonna be the

loan amount, you'll figure out whenever

you start exploring lenders and calling

around, calling the banks, calling

different lenders, you can ask them what

is the loan to cost amount that you guys

allow, do you allow a 90% loan to cost

with a 10% down payment, or do you offer a

80% loan to cost, well then of course if

you have a 80% loan to cost, then they

would require a 20% down payment. Here, in

this example, well, specifically with the

bank that I'm working with as of right

now to get my owner-builder loan, they

require a 15% down payment, so for these

examples, we're going to use a 15% down

payment. So 15% of $250,000 is a $37,500

down payment, and then they offer a 85%

loan to cost which means that they would

lend me $212,500 for this project. Moving

on, next project, total project cost

$500,000, with a 15% down payment, I

would have to pay a $75,000 down payment,

and then 85% loan to cost, they would

give a $425,000 loan. Moving on, total

project costs, I want to build a house

and the total project costs are gonna be

a million dollars, they would've required

a 15% down payment which is gonna be

$150,000 and then boom, over here, 85%

loan to cost, they would lend me $850,000

and I'm not gonna go any higher than that

because whenever numbers start getting

super high, there is sometimes, some

requirements and restrictions once loans

get above a certain amount, so we'll stop

there. Hopefully, that uh, helps you

understand how down payments work, and

there is a down payment requirement, so

you are gonna have enough money in the

bank to be able to afford to make the down

payment on the loan. And the last

qualification that the bank is gonna look

at, to see if you are approved for an

owner-builder loan, has a little bit to do

with what's called DTI, which stands for

debt to income, debt to income ratio

specifically. So, basically this is where

the bank is going to evaluate your income

situation and they are going to evaluate

your debt situation, and they are going

to do the math to calculate the maximum

monthly mortgage payment that you can

afford based on the finished house that

you want to build, right. It does get a

little big confusing, but I have it laid

out in a very easy to understand real-life

example, so before I get into this

real-life example, just let me say that

I'm not a banker, I am not a loan

officer, I am not a licensed professional

lender, whatever you want to call it,

don't judge me on my terminology and

whatever, but I'm going to explain it,

and hopefully, its fairly easy to

understand. Okay, so this is our

real-life example, where we have a, let's

pretend it's a single-man who lives

alone, and he wants to apply for an

owner-builder loan, and see if he can get

approved. Well this fellow makes $240,000

in annual income. So he makes $240,000

a year, pretty good. So this is equal to

$20,000 per month, $240,000 per year

divided by 12 gives you $20,000 per month.

Next is lenders approve you for up to 45%

debt-income ratio, of course every lender

is different, some will only approve 40%,

some will approve like 48%, and then

others are all kinda in-between. But the

lender that I'm working with will approve

you for up to a 45% debt-income ratio. So

basically what you do is you find out the

amount that they will approve you up to

based on your debt-income, and you

multiply that percentage by your monthly

income. So, 45% times $20,000 is $9,000,

that is the maximum monthly payment that

you can afford per month if you don't have

any other debt. Well let's say that this

guy has $4,000 in monthly debt. Whenever

he submits his application, they pull his

credit, they're gonna see that he owes

credit card payments, and a car payment

for a total of $4,000. You know, we can

pretend that this guy currently lives in a

house that he owns, but he is gonna

intend, he intends on selling the house,

once his house that he wants to build is

finished, so the bank is not going to

count the debt of the house he lives in

for his current mortgage payment, so

that's wiped out. So, let's pretend

he has a $4,000 monthly debt, which

is a combination of just credit cards,

and a car payment. So now we subtract the

$9,000 minus his $4,000 in monthly debt,

that gives us a $5,000 monthly mortgage

payment that he is approved for on that

construction loan.