For a construction loan where the borrower serves as their own general contractor (owner-builder), which additional requirement is typically imposed by lenders?
Correct Answer
C) The borrower must demonstrate previous construction experience or obtain builder's risk insurance
Owner-builder construction loans carry higher risk due to the borrower's potential lack of professional construction experience. Lenders typically require evidence of construction competency or enhanced insurance coverage to mitigate the increased risk of cost overruns, delays, or quality issues.
Why This Is the Correct Answer
Owner-builder construction loans carry higher risk due to the borrower's potential lack of professional construction experience. Lenders typically require evidence of construction competency or enhanced insurance coverage to mitigate the increased risk of cost overruns, delays, or quality issues.
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