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5- Your construction loan package will include paper work for
contractor to complete. How does he handle that? The following is a list of warning signs.
a- Doesn’t have time to complete lender’s line item cost breakdown and insists on using his own.
b- Doesn’t understand why lender should be asking for credit references.
c- Doesn’t see why construction loan lender should need to see construction contract?
d- Insists that in his experience non of above are necessary and that this lender don’t know anything about construction loans.
6- Be wary of contractor who prefers to give a “complete package” price. No construction lender will accept that and neither should you. The line item cost breakdown does not have to be completed on every single line, but more merrier. Read it carefully, it will dictate quality of home you end up with.
7- Demand a material’s list. You don’t need contractor who doesn’t have time for this. Some lenders don’t require this and when they do little attention is paid to it.
Insist on a complete list of all materials and fixtures. Go to showrooms, choose them and list your choices by make, model and /or quality. This list should be signed by contractor and you and be made a part of contract.
Saying “A good kitchen will cost so many dollars per foot” doesn’t mean much when you go to showroom at end of project only to find out that you hate what construction loan budget has allowed for.
8- As a part of construction loan process contractor will be asked to provide evidence of Liability Insurance as well as evidence of Workman’s compensation.
He/She may very well not have Workman’s Compensation Insurance if he/she does not directly employ anyone. However, complaints about Liability Insurance are a sure sign of trouble.
9- As material costs are rising, payment of deposits on some deliveries may be required by suppliers and some construction loans will allow that. But be aware of contractor who asks for up front money.
10- Construction loan disbursements are made in stages. Never ever pay a contractor before your local county or city inspector has signed off on that stage. The lender’s inspector only verifies percentage of completion not compliance, so his approval does not mean that your local authorities will also sign off.
Razmik "Raz" Vartanian Construction Loans For Residential Properties. Expert Advice and prompt Service www.constructionloancenter.com
Razmik “Raz” Vartanian is a mortgage broker with some 20-years experience in the industry. Raz specializes in residential construction loans and as such is quoted in MSN’s Money Central (http://moneycentral.msn.com/content/Banking/Homefinancing/P43586.aspis) and The Los Angeles Times. Raz currently manages a mortgage company and is the Webmaster of www.constructionloancenter.com
