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Option Arms

Construction/Perm

Interest Only Mortgage


Commercial Loans

   
Real Estate Investor


Refinance

Contractor Requirements

Contractor Requirements

Due to the nature of any home improvement or renovation loan, additional documentation and information is required to process your loan. You will be qualified at a maximum interest rate unless you lock your permanent loan with either a "hard lock" or our "Smart Lock with Float Down Option" which may reduce the loan amount available to you. If you are doing a Purchase Home Improvement Loan, I will qualify you including your current residence, if any, unless that property has been sold and closed prior to the closing of your new loan. We will, however, allow a fair market rent calculation or signed lease to be used to offset the PITI payment on your current residence. In addition to the standard requiring documentation of income, assets, and liabilities (unless you elect a low or no documentation permanent loan) we will need the following documentation:

• If a purchase, a sales agreement between you and the seller identifying both the property and sales price.

• If improvements are greater than $50,000 and/or there are any structural changes to the foundation, a 100% turnkey construction contract with a licensed contractor is required. A fixed price contract is required and must be signed by both parties. The contract must represent a fair market value for the cost of construction and a reasonable builder profit. "Cost plus contracts are not allowed. If improvements are less than $50,000 and there are no structural changes to the foundation, you may act as your own general contractor. If you are acting as your own general contractor, licensed subcontractors must perform all work and you must submit signed bids describing the scope of the work from each. All aspects of the work must be included in either the contract or signed bids.

• Both you and the builder must sign plans and specifications for the improvement project. Any changes must be reviewed by the appraiser for impact on value and approved by Guaranty.

• A description of materials will be required if enough sufficient detail is not provided within the project specifications.

• If a contractor is used, a cost breakdown will be required.

In addition to the above listed improvement related documentation items, We will require your contractor to be underwritten. This will require a Uniform Builder Application, which is included with this package. We will only make home improvement loans when the builder has demonstrated significant and or relevant experience in successfully improving residential properties and we will only recognize one builder/contractor per project. Along with the builder’s application, the following must be included:

• Copy of the builder’s current Contractors license (where applicable) or business license.
• Current financial statement or 2 years tax returns (corporate or personal)
• Tax ID Number
• Current Liability and Workman’s Compensation insurance certificates. You must provide a hazard risk (builders risk) to us during the construction phase.

We will also order a trade credit report on the builder prior to his approval. Please understand that we require this builder approval process as a consumer protection and to ensure the project is completed in a timely and professional manner adding significantly to your home’s value for years to come.

I have written a  newsletter covering construction/perm loans, and a construction FAQ is available.

I have a list of documentation needed to process your loan.

There is a new page detailing construction loan fees.

I have detailed information on extended interest rate locks with a float down option. 

I have a page on calculating mortgage qualification ratios.

I have included detailed Frequently Asked Questions and common misconceptions about the process of building your home with a construction/perm loan.

One of the questions I frequently get from my clients is about finding a qualified and reliable contractor. After a great deal of research, I do recommend Reliable Remodeler. I have personally used their free service and was very pleased with the outcome. Please complete their contractor referral form for up to 4 local pre screened contractors.

Prequalify for your Construction Loan.