In order for your lender to provide you with the best possible service, you really need to work as a team. At the initial meeting with your lender, ask questions. Do not assume to understand what a disbursement is or how the modification works. Ask. Do not get up off of your seat until you feel absolutely confident in the entire construction process and what is expected of you.
You will be expected to provide thorough, complete documentation throughout the entire construction process. For example, at the start of the process your lender will require a list of everyone who will be working on your project. That will include your Builder/General Contractor, any sub-contractors, your attorney, your real estate agent if one is involved in the sale, and any other contact personnel you think may contribute to the overall process. The list should include names, titles, phone numbers, fax numbers, email addresses if available, insurance information and licenses, where applicable.
Probably the most important document you can provide to your lender will be the specifications. This ‘spec sheet’ will detail all work, material and labor associated with the job. A monetary value is provided on this spec sheet for each job and disbursements to you for payment to your builder and sub-contractors will be based upon this important bit of information. So, be very specific.
You do not want to be short of funds. For instance, halfway through the construction process you decide to put a jacuzzi in the master bathroom without any consideration to price or your original spec sheet. Your emotional self is thinking how nice it will be to sit and soak after a hard day’s work. Remember, you have stated in the spec sheet the cost for all the bathroom fixtures. If you did not include that high end jacuzzi – where do you expect the money to come from when it’s time to pay the plumber???
The lender is going to use the spec sheet as a guide to disburse funds. It will spell out exactly what is going into the house. Leave off that pricey jacuzzi and when your builder submits invoices for payment, there will not be enough money to pay the entire request. If you have money in reserve, great! Most likely the lender will look to you to pull those funds out of reserve and pay for the jacuzzi yourself.
If you do not have any money in reserve, be prepared to sit down to eliminate something from your plans to make up for the funds needed to pay for your new jacuzzi.
Think ahead as you are planning your house. What amenities would you like? Include them on the spec sheet. Take one room at a time and give yourself enough time to decide what you want in that particular room.
It’s like writing a long overdue letter to a friend. You just don’t sit down, compose your letter, sign it and mail it out. You give it some thought. You might write a rough draft and leave it hanging around on the countertop for a few days and every so often you go back to the draft and add to it, or make corrections.
Treat your new house plans the same way. Take time to think about what you really want in each room. Bedrooms could include built in bureau draws to save space. Bet you never thought of that one.
Your master bath could include a towel heater that can be plumbed before all the walls go up. Include a combination over-sized tub and shower if space is an issue. Or, splurge and have a jacuzzi and separate shower. You can have whatever you want….just plan it!
Another area of concern for lenders is the actual floor plan. At the onset of this process you have to provide a copy of your house plans, aka, the blueprints. This multipage document details each floor and locations of various rooms, utilities, storage, electrical, etc.
Please, do not ever, ever change the floorplans without consulting with your lender first. When you decide to change a three bedroom house into a two bedroom house because you want a large master bedroom suite, you may be changing the value of the finished project.
The appraiser has already been out to the site to view it and has found comparable 3 bedroom properties to determine the value of your property upon completion.
Your approval for this construction loan was based upon the value of the finished project. The lender is not going to loan more money than the property is valued at to complete the project, so the appraisal becomes a very important part of the entire loan approval process. You do not want to jeopardize the value of your finished house by eliminating rooms without first consulting with your lender. Remember, you are working as a team with your lender, builder and sub-contractors. You all need to be on the same page for the whole process to proceed smoothly.