Building the home of your dreams can be a glorious process. But it can also be a stressful one. Building a home with a construction loan is a great way to ensure the work you’re paying for is getting done properly and on time. With a construction loan, the lender holds on to the funds and only pays the contractor when the work is complete and inspections are passed.
However, it’s still important to stay diligent to protect yourself. If you feel your contractor isn’t being fully honest with you, you should contact your lender as soon as possible. Here are 5 signs your contractor is scamming you:
- Your contractor suggests skipping the permit process: Unless you’re simply repairing something that already exists or installing a simple swing set in your backyard, you should assume you will need a permit. By obtaining a permit, you’re ensuring that the contractor’s work will meet federal and local building standards and the contractor won’t get paid until an inspector signs off on the work. Also, work done without permits will not add value to your home.
- Your contractor offers a steep discount: The construction world is highly competitive, but you definitely get what you pay for. While it might always seem enticing to go with the lowest bid, it’s important to place quality on a pedestal. Construction can be hard, messy work and skimping here can cost you big time in the end.
- Your contractor asks for money upfront: While many contractors require a small up-front deposit before starting work, be wary of any contractor requiring more than 10 percent of the total project cost before starting work. This is where having a construction loan with a reputable lender will come in handy. The lender will have its own rules for how much it’s willing to pay the contractor at certain stages of the job.
- Your contractor refuses to provide reference: This should be a major red flag. One of the best ways to judge a contractor is by his reputation with past clients. If an online search doesn’t yield many results, it might be best to take a pass.
- Your contractor won’t provide itemized cost of materials: A cost breakdown is important for many reasons. For starters, it ensures you’re getting the quality of materials you want and helps you stay on budget. If your contractor is hesitant to provide a cost breakdown, you should be concerned. This could have a significant impact on the cost of the project.
For more information about a construction home loan or to learn more about building a home with a construction loan, contact us today at www.VAConstructionLoans.org or 1-888-320-7888