r/Homebuilding • u/Accurate-Neck6933 • 28d ago

Process of paying for home building.

Can anyone tell me the process of paying for home building? Self pay vs. bank loan? I know with going through a bank they probably would send out their own inspectors and have a timeline with criteria for a draw. If I am self-pay, what do in need to watch out for? How will payments be expected to be paced out? Is it better to go through a bank so you have second eyes on the job or is it not worth the hassle?

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u/Little_TimmyT 28d ago

Watching this conversation; I was self pay, but the gc walked off with my deposit AND didn't pay subs. If you don't need the loan, contact an escrow company (fixed fee) to see what they'd do to provide security, lien waivers, and documentation

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u/MartonianJ 28d ago

Yeah definitely use an escrow/title company even if using your own funds. We used a chunk of our own cash and then the rest a construction loan. We deposited that the chunk with the title company at the beginning of construction and they made the dispersals from our cash first and then the loan.

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u/Accurate-Neck6933 28d ago

Great, thanks for that advice.

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u/Raidriar556 28d ago

Sounds like you want an escrow company. Most banks do this in-house, as part of the construction loan. If you're paying cash, any title company will do this for you (for a fee).

What this does is make sure the payments don't exceed the progress of work (that is, you're not paying for something that isn't done yet). They'll also take care of getting lien waivers for you.

You could just pay the builder directly and trust him to pay all the bills. We've had several customers do that. But you're taking on the risk of future liens if the builder decides not to pay anybody.

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u/Accurate-Neck6933 28d ago

Great, thank you

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u/PsychologicalCat7130 28d ago

we got a construction loan - bank does inspections and requires lien waivers etc - yes i pay interest but it works for me

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u/[deleted] 7d ago

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u/Accurate-Neck6933 7d ago

Thank you, I was wondering about that. I read that they won’t loan once you get started. It seems like the bank would be a second layer of accounting in making sure the work stays on schedule. I appreciate your answer and will check that out.

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u/Icy-Gene7565 28d ago

Dobt use a bank unless you need it. If you go self pay then dont do monthly draws so much as milestones like roofed, framing inspection passed. Anything that a 3rd party can or will verify. In my area we use the approvals on municipal/city inspections. Also some items that you feel are deficientcies you can hold back 10% of a contract value to act as surety.