McDonnell Group Practical Guide to Renovation Loans 4.13.18 - Flipbook - Page 5
HOW DOES IT
THE RENOVATION LOAN PROCESS
The renovation loan process is similar to a traditional purchase or refinance
transaction. You'll complete a formal loan application andsupply the same
income/asset/credit documents to the Loan Officer.
*TIP* Only work with Lenders that provide a real underwriter's approval upfront. Most
Lenders rely on an LO's "best guess" pre-approval from the start, but LO's aren't authorized
to approve/deny applications. Any mistakes & your loan could be denied at the last minute!
After you're approved and moving forward, the Loan Officer will gather all
required paperwork related to the renovation project (General Contractor bid,
HUD Consultant write-up, etc). These project documents will be provided to a
residential appraiser who will inspect the property, assess the current value of
the home, then add in the estimated repair costs to determine the future value
of the home. Using the "after-improved" value is the key that allows the Lender
to calculate a higher loan amount to finance the repair costs into the loan.
Once the appraisal and all other approval conditions have been received, the
underwriter issues final approval, loan documents are signed, and the loan
funds. The financed renovation funds are wired into a renovation account,
where they will be disbursed to the Contractor after repairs have been
completed. Because quality of construction is so important to the final value,
the Lender will closelyevaluate the Contractor who does the work to ensure
they have the experience and expertise to complete the proposed
improvements.
ADDITIONAL ITEMS REQUIRED ON RENOVATION LOANS:
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Contractor Bid with Itemized Project Specifications
HUD Consultant Work Write-Up
Architectural/Engineering Plans (if applicable)
City Permits (if required)
Completed Contractor Questionnaire (Lender will provide)
Copy of Contractors License, Insurance, and Proof of Bond
To learn more, call us at 714.559.3696 or visit us
online at www.financemyimprovements.com
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