Taking out your own construction loan could be something to worry about, but it doesn’t have to be.  There are many reasons why a builder would want you to have the loan in your name.  It limits his risk and helps cash flow since it will limit his out-of-pocket expenses.  Additionally, the builder may not want to owe money on a house that is built on land you already own.  There are also builders who ask you to take out the loan because the bank will not give them one.
 
If you agree to put the construction loan in your name, make sure you first have in writing a firm understanding of how the builder will be paid.  Will you be paying for the expenses plus a flat fee?  Or will it be a set price regardless of the builder’s costs?  Whatever arrangement you agree upon, work with your banker to ensure the builder’s draw schedule is clearly defined and make sure you have final say before any money is released.  Once the project is in motion, don’t approve any draws until all agreed-upon work is completed, you’ve reviewed any pertinent paperwork, and all of your questions are answered (the bank should help you with this process). 
 
The perfect scenario is where you directly pay all subcontractors and vendors to ensure full payment and don’t pay the builder his fee until the home is completed to your satisfaction.  Of course this type of agreement is not always possible.  If you stay on top of things, having the construction loan in your own name can be an empowering thing that keeps you in control of the building process.