Alongside your lender, the most instrumental person in a Fannie Mae HomeStyle loan is the contractor. Your contractor plays a crucial role. The contractor can be the reason that this is an amazing loan product and an amazing experience for you, or they can cripple the process. Screen your contractor carefully!
Let's start with the basics.
Licensing: Your contractor must be licensed. They need to have insurance. They are also required to prove that they are qualified and experienced. One way that they will do this is through personal references and providing completed projects showing a similar scope of work. So for example, if you are remodeling a kitchen and bathrooms, the contractor is going to have to prove that they have done everything from kitchen work to bathroom plumbing.
Paperwork: Your contractor must be proficient at providing timely and detailed work estimates. These work estimates must be provided in the proper format. It doesn't matter if your contractor has been providing their bids "their way" for 20 years, if they want to participate in this renovation, they needs to follow the guidelines, just like you and I. The work write up/bid will need to be a signed, executed, contract. The work write-up needs to be on letterhead, with contact information. The contract must encompass all work to be performed and provide an indication as to when the various jobs or states of completion will be scheduled, including start dates and end dates.
Financially Solvent: Your contractor is not going to be able to ask you for money upfront. They get paid from draws, which occur after they perform the necessary work. They need to have enough reserves to complete work and be paid later .
Communication: I know it seems simple, but your contractor needs to be a master communicator. They cannot be someone who doesn't answer their phone, or gets so busy on another job that they don't return calls. This is crucial for you to have a successful process. It's crucial at the beginning when we are trying to close the loan and they are providing accurate and detailed bids, and it's crucial when the work is being performed, or when the unexpected comes up.
It always helps if a contractor has been a part of a HomeStyle or 203(k) loan before, so that they know what to expect. If you don't know a contractor, here is an additional article on how we help finding a contractor.