Working with a Home Improvement Lender
There are a variety of lenders that offer home improvement loans, so you may find it helpful to ask a family member or friend for a recommendation, particularly if they've worked with a home improvement lender in the past. You might also inquire about home improvement loan offerings at the financial institutions where you have your mortgage loan, checking account or savings account.
Even before you talk with a lender, it is important to define the type of renovations you need. If you are considering a major project, for example, you may want to find a lender that has experience overseeing work that is similar in scope. The lender should be familiar with construction permits, escrow accounts, and procedures for periodically inspecting a contractor's work.
In addition, the lender should be able to explain the types of home improvement loans available and provide guidance on which loan is best suited for your situation. You may find it helpful to talk to two or three lenders and compare loan types, interest rates, and fees and charges before making your decision.
Once you've finalized your construction contract and closed on your home improvement loan, the contractor can move ahead with the project. Throughout the renovation period, expect your lender to monitor construction progress, oversee any requests for change orders, and disburse payments in accordance with the terms of your contract and renovation loan agreement. Payments, or draws, made to your contractor are often scheduled after 30, 60 and 90 percent of the work is completed.
Before making disbursements to the contractor, the lender may inspect the property to verify that the work has been completed. These inspections help to prevent the contractor from receiving funds before work has been completed and to ensure that the quality of work performed is satisfactory. The final payment to the contractor is not made until the work is completed and you are satisfied that all contract requirements have been met.
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