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After closing on your loan and starting the construction of your property, the next step in the renovation process is the releasing of funds. The consultant will meet you at the subject property and inspect the entire building. All items included in your renovation plan will be reviewed. The amount released will be directly related to work specified on the plan that has been completed. The signed draw form will be faxed and then mailed out to the lending institution within 24 hours, for them to process your draw request and produce the check. Contact your lender to find out what their turn around time is.
Each lending institution has specific policies concerning the initiating of the draw request, therefore, it is imperative that you contact them before your first draw appointment.
After following their instructions you will be asked to contact our office. We have installed a dedicated draw line for your convenience to streamline the process: 781-321-2247 option 4 on menu. Please leave a clear, concise message with the following information or email us mpetrus@amconsults.com:
- Name
- Address of Property
- All telephone numbers where we can contact you. (Include area
codes please).
- Date you will be ready for inspection.
Our Operations Manager, Maria Petrus, will return your phone call to give you an appointment within 48 hours. Please note that we set up a majority of our draw appointments one week in advance, therefore, please identify when you are ready so we may minimize any unnecessary delays. We will try to accommodate you with your specific time request, however, at times this may not be possible.
- The borrowers should be present at the inspection.
- If a General Contractor is overseeing the renovations he must attend the Draw Inspection. However, if you are renovating the property under the “Self Help” arrangement you are not required to have a contractor present - Contact your lender to find out who is to sign your draw.
- The consultant will require that all current permits be supplied at the time of inspection. Failure to submit these will delay your draw payment.
- Fill out column #3 on your updated draw form, this should accurately reflect work completed as of the date of inspection.
- The consultant will then inspect the completed work and either concur or make adjustments to the amounts you have entered.
- After the inspection is completed the consultant totals the funds to be released and subtracts 10% for holdbacks. The holdback monies should be released within 35 days after the final inspection. Contact your lender to find out their policy on the holdback release time frame.
- The 10% holdbacks on both the draw release and contingency totals are required by HUD to ensure no liens have been placed on the subject property.
Up Front Money:
Typically there is no up front money in Conventional and FHA renovation programs. A.M. Consulting does not have the authority to release any up-front money. Only your lending institution can make the approval. If you are looking to receive up-front money on special order items IE; (windows, cabinetry, & flooring), please contact your lending institution for their policy pertaining to these items.
After you have closed on your property and have started the rehabilitation you may want to make changes to the plan. The renovation plan is flexible and changes can be made at the draw inspection through the change order request form. Our Inspectors carry this change order with them at the inspections.
When considering changes the consultant and lending institution must be notified as to the specific components that are to be changed. Before any changes can be made, please understand that your property was appraised based on the rehabilitation to be completed. Any changes made to the plan will have to be reviewed to determine what effect they may have had on the appraised value of the property.
If a change is made to the original plan the money is transferred into the contingency fund and may be used at a later date. Please note: On FHA loans you cannot change HUD required items!
You are ready for the final inspection when all the work listed in the plan has been completed.
All work done outside the scope of the plan will fall under HUD minimum property standards and must be completed prior to the final draw inspection.
The final inspection follows the same format as the previous draw(s) with the exception that all permits must be submitted and signed off on (showing completion of work by code) by the local town/city officials and the 10% holdback is released from your lender.
When calling for a final inspection please notify your lending institution so they can forward, for your signature, all applicable forms. Please note that the holdback money may not necessarily be released at the same time the draw inspection funds are released, however, each lender has their own policy in which they follow.
The contingency fund is a percentage (10-20%) of the total renovation rehabilitation estimate. This money has been allocated for unforeseen health and safety issues that may occur during the project. Unlike the partial release of funds for items within the plan, the contingency money is “only” released when the work on a particular component is completed 100% and is accompanied by a receipt. At the completion of the project, if additional work has been completed, the contingency may then be applied to these items.
If you do not utilize all the contingency money allocated, this money will be applied to the principal balance of your mortgage. Although this will reduce the number of mortgage payments to be made, it will not change the amount of your monthly mortgage payment.
After the inspection is complete the consultant will submit all pertinent information to the lending institution within 24 hours. Typical turn around time varies in respect to when each lending institution releases the check, however, 3-7 business days appears to be the target date many companies strive for. At this point you would contact your lending institution to find out the status of your draw check.
Thank you again for letting us service your renovation loan. If you have any questions or suggestions, please
contact us.
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