Hiring a Contractor to Build or Renovate Your Home
October 29, 2023
What do you need to know when comparing contractors to build or renovate a home using an FHA mortgage?
Whether considering a One-Time Close construction loan or an FHA 203(k) rehabilitation mortgage, you’ll want to keep some important things in mind before deciding on the right contractor.
How Many Bids to Gather Before Hiring
Some sources believe a minimum of three bids from different contractors is a good place to begin.
Hiring a Builder to Build or Repair Your Home
Before you commit to the right contractor, make sure the one you’ve chosen is licensed in your state, has current insurance, and that the insurance meets any state or lender requirements that may apply.
Be sure to review your state government's official site, Angie’s List, or other vetting websites to learn if your chosen contractor has had issues or problems in the past, especially related to on-time completion, on-budget completion, and how unexpected issues were handled.
The Rule of Threes
For each bid, FHA borrowers should get a minimum of three references for each contractor or builder to be considered for the job. It’s a smart idea to run the builders you’ve selected by your loan officer, too, just in case.
Get Everything in Writing
A verbal promise for completion isn’t worth anything. Nor is a verbal promise to come in on time and on budget. Don’t gamble with a major investment, get all promises in writing, and don’t work with a contractor who won’t provide details in writing.
This is NOT legal advice. It’s just a reminder to consider a very important factor. If you have to take the contractor to court, don’t forget that court cases can take years.
By the time you get in front of a judge, the verbal promise made will be a distant memory, and only the paperwork will offer proof of what was discussed.
Building a Home? Consider a Real Estate Attorney
Some might balk at the notion of hiring an attorney, citing the costs involved. But you are already spending a great deal of money to build your house from the ground up. Spending a bit more to ensure you don’t get burned on the deal is a smart move. It doesn’t pay to be cheap when building a home you plan to live in for a long time.
Do Not Pay in Cash
No matter what a contractor tells you, always ensure there is a paper trail for all payments. Do not pay in cash.
FHA, VA, and USDA: One-Time Close Loans
Want More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Whether considering a One-Time Close construction loan or an FHA 203(k) rehabilitation mortgage, you’ll want to keep some important things in mind before deciding on the right contractor.
How Many Bids to Gather Before Hiring
Some sources believe a minimum of three bids from different contractors is a good place to begin.
Hiring a Builder to Build or Repair Your Home
Before you commit to the right contractor, make sure the one you’ve chosen is licensed in your state, has current insurance, and that the insurance meets any state or lender requirements that may apply.
Be sure to review your state government's official site, Angie’s List, or other vetting websites to learn if your chosen contractor has had issues or problems in the past, especially related to on-time completion, on-budget completion, and how unexpected issues were handled.
The Rule of Threes
For each bid, FHA borrowers should get a minimum of three references for each contractor or builder to be considered for the job. It’s a smart idea to run the builders you’ve selected by your loan officer, too, just in case.
Get Everything in Writing
A verbal promise for completion isn’t worth anything. Nor is a verbal promise to come in on time and on budget. Don’t gamble with a major investment, get all promises in writing, and don’t work with a contractor who won’t provide details in writing.
This is NOT legal advice. It’s just a reminder to consider a very important factor. If you have to take the contractor to court, don’t forget that court cases can take years.
By the time you get in front of a judge, the verbal promise made will be a distant memory, and only the paperwork will offer proof of what was discussed.
Building a Home? Consider a Real Estate Attorney
Some might balk at the notion of hiring an attorney, citing the costs involved. But you are already spending a great deal of money to build your house from the ground up. Spending a bit more to ensure you don’t get burned on the deal is a smart move. It doesn’t pay to be cheap when building a home you plan to live in for a long time.
Do Not Pay in Cash
No matter what a contractor tells you, always ensure there is a paper trail for all payments. Do not pay in cash.
FHA, VA, and USDA: One-Time Close LoansWant More Information About One-Time Close Loans?
We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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