Managing a construction or renovation project is not difficult once you understand the process. There are a variety of steps that must be taken in the correct order to insure success. Trying to short cut the process or taking things out of order could mean you don’t get to the finish line.
The proper way to start the project is with a budget and a pre-approval so you know that you qualify. If you have cash to work with, will that cash carry you through to completion? If not, you may need a construction or renovation loan. A construction loan requires an appraisal that supports the value for the project you are undertaking. To get the appraisal completed you need a general contractor that will provide all the construction exhibits such as plans, specifications and a contract. The plans and specifications will paint the picture of the completed project with the fits and finishes you desire. The contract will outline the scope and cost of the project. All of these are very important for the appraisal. Anyone trying to do this on their own, without the proper training or credentials, will not be able to provide the level of detail required for the construction exhibits and value of the project could suffer. If you want the value to be supported by the appraisal we require for the loan, it is vital that this step is done well.
Never start any work until the construction loan or renovation loan has closed. This is critically important. In order for the title company to insure the project, there are steps that must be taken after closing to protect everyone’s lien rights. The mortgage from the construction or renovation loan closing must be recorded and the title company sends someone out to the property soon after closing to take pictures. Pictures provide visual proof that no materials or equipment have been dropped off early or parked on the property. There can not be any visible signs of any prior work before the construction or renovation loan closed. Any violations will stop the process and cause lengthy delays.
Always start with the end in mind. What do you want the project to look like when it is finished and what do you want the mortgage product to look like at the end? Unless you are able to pay cash for everything you want to do you will need a mortgage. If you need money for the project there are some basic rules to follow. If you are considering any type of construction or renovation project in the near future, call our team first. We are the graduate school of construction and renovation lending. You will be glad you did.