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Owner's Name(s):

__________________________________ Address:

___________________________________________ City: ____________ State:

_____ Zip Code: ________________ Telephone Work:_________________________ Home: ______________________________

Contractors Name: _______________________________ License no.:_________________

Address: __________________________________________ City: ___________________

State: _____ Zip Code: ________________ Telephone Work: ______________________ Home: ______________________________


made this date, __________________, between the above mentioned Homeowner

(Owner) and Contractor, is for the rehabilitation of the property located at

______________ ______________________that has been approved for FHA mortgage

insurance under Section 203(k) of the National Housing Act. The Owner(s) shall

pay the Contractor the sum of $__________ for completion of the work, including

all sales tax due by law, together with such increases or decreases in the

contract price as may be approved in writing by the Lender. The work will begin

within 30 days of loan closing with the Lender and will be completed by

______________________, unless delayed beyond the Contractor's control. The

General Provisions listed below are made a part of this Agreement. The contract

documents consist of the architectural exhibits listed in the Rehabilitation

Loan Agreement between the Owner(s) and the Lender, or as described below (or on

an attached sheet):

Owner(s) Signature(s) and Date


Contractor's Signature and Date


1. Contract Documents: This Agreement includes all general provisions, special

provisions and architectural exhibits that were accepted by the lender. Work

not covered by this agreement will not be required unless it is required by

reasonable inference as being necessary to produce the intended result. By

executing this Agreement, the contractor represents that he/she has visited the

site and understands local conditions, including state and local building

regulations and conditions under which the work is to be performed. 2. Owner:

Unless otherwise provided for in the Agreement, the owner will secure and pay

for necessary easements, exceptions from zoning requirements, or other actions

which must precede the approval of a permit for this project. If owner fails to

do so then the contract is void. If the contractor fails to correct defective

work or persistently fails to carry out the work in accordance with the

agreement or general provisions, the owner may order the contractor in writing

to stop such work, or a part of the work, until the cause for the order has been



2. Contractor: The contractor will supervise and direct the work and the work

of all subcontractors. He/she will use the best skill and attention and will be

solely responsible for all construction methods and materials and for

coordinating all portions of the work. Unless otherwise specified in the

Agreement, the contractor will provide for and/or pay for all labor, materials,

equipment, tools, machinery, transportation, and other goods, facilities, and

services necessary for the proper execution and completion of the work. The

contractor will maintain order and discipline among employees and will not

assign anyone unfit for the task. The contractor warrants to the owner that all

materials and equipment incorporated are new and that all work will be of good

quality and free of defects or faults. The contractor will pay all sales, use

and other taxes related to the work and will secure and pay for building permits

and/or other permits, fees, inspections and licenses necessary for the

completion of the work unless otherwise specified in the Agreement. The

contractor will indemnify and hold harmless the owner from and against all

claim, damages, losses, expenses, legal fees or other costs arising or resulting

from the contractors performance of the work or provisions of this section. The

contractor will comply with all rules, regulations, laws, ordinances and orders

of any public authority or HUD inspector bearing on the performance of the work.

The contractor is responsible for, and indemnifies the Owner against, acts and

omissions of employees, subcontractors and their employees, or others performing

the work under this Agreement with the contractor. The contractor will provide

shop drawings, samples, product data or other information provided for in this

Agreement, where necessary.

3. Subcontractor: Selected by the contractor, except that the contractor will

not employ any subcontractor to whom the owner may have a reasonable objection,

nor will the contractor be required by the owner to employ any subcontractor to

whom the contractor has a reasonable objection.

4. Work By Owner or Other Contractor: The owner reserves the right to perform

work related to the project, but which is not a part of this Agreement, and to

award separate contracts in connection with other portions of the project not

detailed in this Agreement. All contractors and subcontractors will be afforded

reasonable opportunity for the storage of materials and equipment by the owner

and by each other. Any costs arising by defective or ill-timed work will be

borne by the responsible party.

5. Binding Arbitration: Claims or disputes relating to the Agreement or

General Provisions will be resolved by the Construction Industry Arbitration

Rules of the American Arbitration Association (AAA) unless both parties mutually

agree to other methods. The notice of the demand for arbitration must be filed

in writing with the other party to this Agreement and with the AAA and must be

made in a reasonable time after the dispute has arisen. The award rendered by

the arbitrator(s) will be considered final and judgment may be entered upon it

in accordance with applicable law in any court having jurisdiction thereof.

6. Cleanup and Trash Removal: The contractor will keep the owner’s residence

free from waste or rubbish resulting from the work. All waste, rubbish, tools,

construction materials, and machinery will be removed promptly after completion

of the work by the contractor.

7. Time: With respect to the scheduled completion of the work, time is of the

essence. If the contractor is delayed at anytime in the progress of the work by

change orders, fire, labor disputes, acts of God or other causes beyond the

contractor's control, the completion schedule for the work or affected parts of

the work may be extended by the same amount of time caused by the delay. The

contractor must begin work no later than 30 days after loan dosing and will not

cease work for more than 30 consecutive days.

8. Payments and Completion: Payments may be withheld because of. (1)

defective work not remedied; (2) failure of contractor to make proper payments

to subcontractors, workers, or suppliers; (3) persistent failure to carry out

work in accordance with this Agreement or these general conditions, or (4) legal

claims. Final payment will be due after complete release of any and all liens

arising out of the contract or submission of receipts or other evidence of

payment covering all subcontractors or suppliers who could file such a lien.

The contractor agrees to indemnify the Owner against such liens and will refund

all monies including costs and reasonable attorney's fees paid by the owner in

discharging the liens. A 10 percent holdback is required by the lender to

assure the work has been properly completed and there are no liens on the



19. Protection of Property and Persons: The contractor is responsible for

initiating. maintaining, and supervising all necessary or required safety

programs. The contractor must comply with all applicable laws, regulations,

ordinances, orders or laws of federal, state, county or local governments. The

contractor will indemnify the owner for all property loss or damage to the owner

caused by his/ her employees or his/her direct or subtier subcontractors.

10. Insurance: The contractor will purchase and maintain such insurance

necessary to protect from claims under workers compensation and from any damage

to the owner(s) property resulting from the conduct of this contract.

11. Changes in the Contract: The owner may order changes, additions or

modifications (using form HUD-92577) without invalidating the contract. Such

changes must be in writing and signed by the owner and accepted by the lender.

Not all change order requests may be accepted by the lender, therefore, the

contractor proceeds at his/her own risk if work is completed without an accepted

change order.

12. Correction of Deficiencies: The contractor must correct promptly any work

of his/her own or his/her subcontractors found to be defective or not complying

with the terms of the contract.

13. Warranty: The contractor will provide a one-year warranty on all labor and

materials used in the rehabilitation of the property. This warranty must extend

one year from the date of completion of the contract or longer if prescribed by

law unless otherwise specified by other terms of this contract. Disputes will

be resolved through the Construction Industry Arbitration Rules of the American

Arbitration Association.

14. Termination: If the owner fails to make a payment under the terms of this

Agreement, through no fault of the contractor, the contractor may, upon ten

working days written notice to the owner, and if not satisfied, terminate this

Agreement. The owner will be responsible for paying the contractor for all work

completed. If the contractor fails or neglects to carry out the terms of the

contract, the owner, after ten working days written notice to the contractor,

may terminate this Agreement.

For informational purposes only-Consult Legal

Counsel prior to using any documents

Learn more about remodeling loans

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.

NEW! 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.

We offer the ability to qualify and close a construction loan into several unique programs which accommodate borrowers with non traditional income or asset situations. Please visit my No Docs page.

Prequalify for your Remodeling Loan.


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