Summary, I have about 100k equity in a place and have 25k debt remaining. I have a 780 fico. So I wish to build a barndo. I've been to two different banks and both say that In Texas I cant legally build my own house (if I borrow money) and that I have to have a contractor sign off on it and make sure it comes in at or below budget and make sure everyone is paid. So neither banker can pin down exactly what makes a contractor eligible to sign off. I have asked three contractors if they can sign off and all said yes. The three contractors vary between a major homebuilder and a one man handyman operation. Can someone please shed some light on this for me. What makes a contractor a contractor in the eyes of lenders? Any other advice would also be greatly appreciated.

Yes, you need a contractor. They want an independent 3rd party that can complete the project if you bailout. They want someone to say that the budget is appropriate.

I work in more rural areas, so my definition of contractor has to be a little more broad than urban lenders. I want someone who has built in the area before, and has a reasonable number of builds under their belt. In other words, the contractor needs to be a bona fide contractor, not some homeless guy off the street. Other banks may have more requirements.

If you don't like the bank's requirements, you can always build it with your own cash...

Thx for not helping.

Sorry, Sally, let me spell it out for you a little more simply. It depends on the Lender, they are all different.

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Thx for not helping.

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He gave you the right answer, I don't know why you have a problem with that.

yeah dude, Bitter Old Man answered your question and you got smart with him, so I'm not sure others are gonna be falling over themselves to help you.

What he said is exactly right. There is no magic definition of contractor for what you are wanting to do. For a brief time Texas was requiring contractors to get registered, so that provided a little certainty, but that went away 5 + years ago. I don't know of any lender that is going to allow you to be your own contractor, if you are using their money to do the construction.

You need a contractor not only for the reasons Bitter Old Man pointed out, but also in order for the bank to get a valid lien on your homestead property in Texas, their lien has to be renewal and extension of a mechanics lien contract, so you have to actually contract with a contractor ( a mechanic's lien contract) for the work, and the contractor assigns that lien to the bank. If you are your own contractor, this would not be possible, and is yet another reason why your bank won't allow it.

You could possibly just do a home equity loan if you are okay with the terms and are able to get enough to pay for the improvements yourself, but short of a home equity loan, in order to get cash out of your homestead for improvements, you have to do mechanic's lien route.

If the property isn't your homestead and you have other property you can designate as homestead, it might be possible to do a cash out, but you will have to discuss with a local community bank or someone like capital farm credit.

Thx, that's what I was looking for.

We offer a one-time close construction loan.

To qualify a builder/contractor we require:

1. Documentation of business entity such as articles of incorporation, etc.
2. Proof there are no judgments.
3. Resume'.
4. $1,000,000 minimum General Liability insurance.
5. Bank reference.

I'm in Houston but recently qualified a builder in Grimes County who is primarily in commercial construction. He had built 4 homes in the past 5 years so we are allowing him to build a home for one of our clients.

I'm not sure why you're having such a difficult time finding out exactly what is required.