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The Home Renovation Loan Timeline and the #1 Mistake Most People Make
The number one mistake, hands down, that most people make with their home renovation loans is not allowing enough time to get through the process, especially for those people who are going to be very hands-on with their home improvement project, doing some of the work themselves.
Renovating a home, and obtaining a loan to do so, is not as simple as going out and obtaining a mortgage to just buy a home. You CANNOT do it all in three weeks. Period. Do not expect to do so. This pre-rehab and planning stage is often cited as the most stressful period of most people's home improvement experience.
If you are buying a piece of home and wrapping its purchase into your home renovation loan, then you must be sure you allow enough time to get to closing on your loan before your purchase contract expires. Do not let the seller or the seller's real estate agent pressure you into a 30 day contract. This can be tricky, as most sellers and agents have no idea of the home improvement planning process you will be going through.
They only know that the last time they bought or sold a house it took about 30 days. Therefore, you will need to negotiate more time to get to closing unless you already have finalized blueprints, budgets, and permits. Realistically, sixty days should be the minimum contract period, depending on how well prepared you are and how extensive the home renovations will be.
As mentioned, this is tricky. The complicated part is the timing of any required blueprints or engineered drawings if the home improvement project involved structural changes. Usually, for most home renovation loans, a homeowner will need to coordinate with their general contractor and the local building department for building permits or variances.
Once you have decided on the right home to purchase and the list of repairs to make, you have a ton of work to do as quickly as possible. Getting your bids (properly) to complete your budget is the single most important thing you need to do in the whole home improvement planning process. And, it can rarely be done in just a week or two.
And to make matters worse, when the clock is ticking towards your contract's closing date, you will often be pressured to skip a step or let some of the budgeting and bids slide. This is home renovation project suicide. Proper budgeting is vital to rehabbing a home, especially when there is a home renovation loan involved. Even if you are hiring a licensed general contractor to do the work for you, you will need to take the time to flush out the exact budget and sign a proper contract for all of the work to be done.
You need as much time as possible to complete your budget, understand the county building and permit requirements, and complete your loan documentation. Sixty days will seem to fly by.
The best course of action is to get pre-approved for one of the home renovation loans once you have decided to fix up a home so that you know your maximum budget you can qualify for. This way, you can properly set a maximum price for the purchase of the home and then choose an appropriate renovation plan that can be completed for the remaining budget or less.
The important thing to understand is that these decisions, which may be some of the biggest of your life, must be made quickly if you have not planned correctly or if you are under the pressure of a closing date. Do everything possible to organize your project before the clock starts counting down towards the seller's closing date. This will not only make your home improvement project much less stressful, but it will make the home renovation loans seem that much simpler.
To complete the home improvement loan process, you'll work with your loan officer to provide the required documentation. The appraisal and title work will have been ordered by the processor. You will need to schedule an appointment with the appraiser to review your plans and deliver the appraisal fee. You may also need to contact the closing agent to be sure they have all of your contact information.
While the appraiser and closing agent are doing their jobs, you will need to submit any remaining income documentation, asset statements, or other requested information. You will also need to arrange your insurance and permit applications during this time. As you can see, you will be busy. This is the trade-off for the chance to build the exact home that you want.
Once the appraisal, title work, budget, and all other required documents are in the hands of the lender, the file can be submitted to final underwriting. Once your home renovation loan has cleared the underwriting stage, things will move very quickly. It will be a relatively simple matter of working out some minor details and scheduling your closing. Then, you will finally be done with the home renovation loan and ready to begin your home improvement project.
About the Author Chris Esposito provides home renovation loans for clients who wish to buy and fix up single family residences to build instant equity into their homes. For more info about home improvement projects and financing, go to http://www.DirectRehabLoans.com, or call (877) 876-3688.
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