Discover the secrets to getting a loan for your renovation

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Question: I want to renovate my house. How to start the process of obtaining a loan?

A: that’s a great question. Starting a home remodel can seem overwhelming or confusing (there’s a lot to consider!), But if you break it down, the process can be more manageable.

First, establish your construction team (lender, builder and architect). This group of people will be a part of your life for a long time (up to 24 months, depending on the complexity of your renovation), so it’s important to do your research and have good communication and trust with the entire team.

After the initial excitement of planning your dream home with your architect and builder, you are faced with the financial question: how am I going to pay for it? At this point, you should meet with a reputable lender who specializes in construction loans. There are a small number of lenders who have extensive experience in this area, so narrow down your options and then choose.

For a renovation or construction, look for a lender who can issue a “construction to permanent loan,” which is a one-time closing option. A construction loan to permanent provides funds for the construction period of the renovation, then turns into a permanent loan without the need to refinance again.

Once you have identified a lender, interview loan officers (each lender has loan officers working for them who meet with applicants to help them manage the application process) to identify who passes the lending process with knowledge. , experience and understanding.

Schedule a meeting or construction class to learn how the entire construction loan process works, from pre-application to construction completion. Be prepared to discuss the scope of the construction project.

As you leave the meeting or class, you should be able to do four key things.

1. Know your borrowing strength. This number is the result of an estimated financial analysis based on factors such as your income (debt-income), assets, cash reserves, source and verification of funds required when financing, credit history, credit rating and loan program.

2. Determine the amount of your loan. Depending on the lender, the total acquisition cost or the value of the completed project (as determined by an appraisal) will determine the total property value that a lender uses to help calculate the maximum loan amount. Other conditions may be determined by the underwriting and loan program requirements to establish the loan amount approved.

3. Decide on your builder. A good professional will be able to provide an accurate cost breakdown and schedule. They also come with an understanding of building codes and requirements, knowledge that most amateur home builders would have to invest hours of research to obtain. The ability of a professional to read plans accurately is extremely important. Another bonus of hiring someone: a general contractor will often provide warranties on the products and work they perform, either personally or through subcontractors.

4. Identify a timeline. The three main factors that go into determining how long it will take to complete your project usually include obtaining permits, financing the loan, and availability of the builder. Before meeting with your architect, call the permit office to verify the information you will need to provide and the boundaries of your construction and property. Be sure to get an estimate of the permit schedule once your application has been submitted so that you can incorporate those dates into your plan. A word of advice: work with the revisions required by the city or county, there will be revisions.

Taking the time to plan your remodel early may seem like a lot of work, but it will pay off in the long run when it helps the overall remodeling process run smoothly. Houses are built on foundations – and at the end of the day, you’ll be glad you laid that foundation of preparation and planning.

Susan Henry is Vice President and Branch Manager of WaFd Bank Lynnwood Branch, member of the Master Builders Association of King and Snohomish Counties (MBAKS). If you have a question about home improvement, renovation or home construction that one of the more than 2,800 MBAKS members would like to answer, write to [email protected]


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