Construction Loan Article Center
Tuesday, November 21, 2006
If you have a fixed price contract, it will take into consideration all materials and labor costs. Still, it is important to read it thoroughly in order to see what is covered and what is not. There are both on-site costs (construction materials and labor) and off-site costs (the paper that leads to construction) to consider. Your contract may only deal with the on-site costs, so make sure you fully consider all the off-site costs such as architect's fees and so forth.
The contract price may not be the only expense you need to worry about. Often, a construction lender will also build a contingency reserve into the loan. A contingency reserve is a specified percentage or dollar amount. The lender, in case of unforeseen circumstances that may negatively impact construction of your home usually requires contingency reserves. The amount required may be based on a percentage of the contract price, on-site costs or loan amount. We recommend that you ask your lender about its policy regarding funds that remain unused after the construction of your home is completed.
Other costs that you may face can include construction loan closing costs and fees as well as insurance requirements. The aforesaid costs can vary so you should discuss them with your lender. But don't worry; we have a Construction-to-Permanent Loan that includes on-site costs, off-site costs, closing costs, interest reserve, contingency reserve and lot purchase or value.
<< Blog Home << Previous Page << Home
Make sure the builder you hire is experienced. He or she should be someone who has a reputation of delivering high quality work within budget, in the time period prescribed, and in a LIEN-FREE condition.
It is also vital to ensure that your builder is appropriately licensed, if licensing is required in your state. If so, ensure that the general contractor you choose is licensed and has a history of building the type of home designed by your architect. You may ask for a copy of his or her license and crosscheck it with the licensing authorities or governing board in your area. You may also ask for references, which may include a list of supply companies with whom the aforesaid builder has done business and people he or she has built similar homes for in the past. You may also want to ask what kind of insurance the contractor carries, such as worker's compensation or, general liability insurance.
One way to get on the inside of the builder community is simply word of mouth through friends, family and even your architect. Once word gets out that you are in the market for a builder, you may get many offers from different people who want to build your house. It is important to keep in mind that the lowest bid may not always be the best deal. Consider when payments to the contractor are scheduled. Also, when comparing bids, make sure to compare the same materials and the amount of time for completion of construction.
Once you have finally narrowed your list to a few builders, you may consider taking bids. In order to get a good estimate, make sure each builder is provided with a complete set of the plans. Keep in mind that if you borrow money, a job finished early may actually save you on the interest of the borrowed construction funds. In the same vein, if the time period is extended, you may have to pay extension fees and more in the form of interest.
<< Blog Home << Previous Page << Home
|
|
|
