The Home Buyer's Korner

Information presented should be used for educational purposes only.

March 27th, 2015

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GREATER ESCONDIDO CALIFORNIA

The Home Buyer’s Korner

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Hiring A General Contractor

cSelecting the right general  contractor is often a vital part of your home search. If you’re shopping includes older homes start looking early, sooner or later you’re probably going to want to know a good one.

Hiring the right general contractor can make all the difference to a successful Home Renovation Loans like the FHA 203K or the Fannie Mae (FNMA) HomeStyle program, even USDA Rural Development Home Loan can include up to $10,000 for home improvements.

And, don’t forget about the FHA One Close or USDA’s newly created Construction to Perm financing to help rural and semi-suburban areas to create a robust new home market for both brick and mortar, stick built, manufactured and modular homes.  

Starting your selection and bidding process should begin by searching for general contractors that are experienced with home ownership mortgage loan programs mentioned above, along with references that backs their work up.

If you’re thinking about manufactured or modular home ask the general contractor or home retail dealer about the FHA One Close and of USDA Construction to Perm Home Loans. Odds are you’ll find them both quite attractive. Working with General Contractors or Manufactured and Modular Home Retail Dealers who are members of our network are  the real pros locally in the home industry. As a HUD or USDA approved lender, FHA and RHS looks to them to approve any work completed by general contractors and are properly licensed, trained and insured, so you can feel a little more assured you are working with a group of professionals to assist you in creating a wonderful home purchasing experience.

An experienced FHA or USDA construction lender will have a well-established process for releasing funds to your general contractor when the time comes. The process can differ from program to program and lender to lender, while some may fund a substantial amount of your project at closing, others rely on your general contractor to have appropriate lines of credit to begin the work. After you find out your lenders and general contractors funding policy you can better explore your funding needs and ensure everyone is on track.

ChecksFunding your new home construction or renovation project is probably the single most important question that home buyers and real estate agents fail to ask. Don’t be one of them. Who’s managing your draws impacts the time that it takes to receive your funds! Some lenders will provide a check at closing or issue a check within several day of closing, while others contract out their draw system and that can take up to 30 days or more to get started, so be sure to know what your lender can officer and if it works for the general contractor you’ve selected.

Many general contractors don’t look forward to lengthy delays to get paid and some simply don’t have a line of credit to take on a large project. When you’re ready to discuss your financing needs, be sure to bring up your lender’s funding policy and ensure it’s not an issue overlooked. 

As various stages of work are completed your lender has a licensed property inspector inspect your home to ensure all construction or renovation work is completed and then releases additional funds to complete the next stage of your project. 

Once your general contractor’s work has been inspected by a licensed property inspectors, you’ll want to send your inspection paperwork.   

HUD Exhibit

Generally, 10 percent of each draw will be held back until your construction or renovation work is completed and your general contractor is ready for a final inspection. At that time, you’ll want to submit your final draw request and any settle and hold-back agreements between you and your general contractor.

Lenders also set up contingency reserves as a built-in buffer, just in case you have any cost overruns and build it into your total loan amount. Generally 10%-20% of the repair cost are set aside to cover any cost overruns with your construction or renovation project. Once they’ve disbursed your last draw, they’ll review your account to see if any reserves remain and credit your mortgage balance. Do yourself a favor and work with your general contractor to stay on budget!

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CALIFORNIA HOME OWNERSHIP TOOLS

FHA 203K

Your Home Purchasing or Refinancing & Renovation Tool

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

FANNIE MAE HOMESTYLE

The Conventional Alternative to FHA 203K

Great for Real Estate Investors and Second Home Renovations

Mortgage Loan Officers, Real Estate Agents & General Contractors

are ready to assist you with your home purchase

USDA RURAL DEVELOPMENT

Up to $10K for Home Improvements, Renovations or a Simple Remodel

Mortgage Loan Officers, Real Estate Agents & General Contractors are ready to assist you

A SIMPLE HOME SHOPPING INSPECTION TOOL

Organizing your home shopping experience affords a wise decision-making process.

This simple home inspection tool makes your ultimate buying decision a smart one.

To print this document click on “Open in New Window” located at the lower right corner;

click on “File”; then click on “Print”. In the center of the screen you will

have the option to “Create A Printable PDF of the Presentation”.

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