High-Fee Loans (HOEPA/Section 32 Mortgages)
Home Equity Credit Lines
Home Sweet Home Improvement.
Mortgage Servicing: Making Sure Your Payments Count
Need a Loan? Think Twice About Using Your Home As Collateral
Your Home on the Loan Line is Risky Business
Shopping for Home Equity Loan?
Looking for the Best Mortgage
Understanding the Home Mortgage Process
Understanding your Rights to
The Mortgage Application
Stop and What to Look for
Mortgage Cycling Revealed
Build Massive Wealth With Foreclosures.
How To Build Your Free House
Own Real Estate With No Money Down
Make Your Next Home A Resort
Home Buyer Defense Guide
Get Started In Real Estate Investing!
Sweet Home Improvement
Whether you’re planning an addition
for a growing family or simply getting new storm windows,
finding a competent and reliable contractor is the first
step to a successful and satisfying home improvement
Your home may be your most valuable
financial asset. That’s why it’s important
to be cautious when you hire someone to work on it.
Home improvement and repair and maintenance contractors
often advertise in newspapers, the Yellow Pages, and
on the radio and TV. However, don’t consider an
ad an indication of the quality of a contractor’s
work. Your best bet is a reality check from those in
the know: friends, neighbors, or co-workers who have
had improvement work done. Get written estimates from
several firms. Ask for explanations for price variations.
Don’t automatically choose the lowest bidder.
Depending on the size and complexity
of your project, you may choose to work with a number
of different professionals:
- General Contractors manage all aspects of your project,
including hiring and supervising subcontractors, getting
building permits, and scheduling inspections. They
also work with architects and designers.
- Speciality Contractors install particular products,
such as cabinets and bathroom fixtures.
- Architects design homes, additions, and major renovations.
If your project includes structural changes, you may
want to hire an architect who specializes in home
- Designers have expertise in specific areas of the
home, such as kitchens and baths.
- Design/Build Contractors provide one-stop service.
They see your project through from start to finish.
Some firms have architects on staff; others use certified
Don’t Get Nailed
Not all contractors operate within
the law. Here are some tip-offs to potential rip-offs.
A less than reputable contractor:
- solicits door-to-door;
- offers you discounts for finding other customers;
- just happens to have materials left over from a
- only accepts cash payments;
- asks you to get the required building permits;
- does not list a business number in the local telephone
- tells you your job will be a "demonstration;"
- pressures you for an immediate decision;
- offers exceptionally long guarantees;
- asks you to pay for the entire job up-front;
- suggests that you borrow money from a lender the
contractor knows. If you’re not careful, you
could lose your home through a home improvement loan
Interview each contractor you’re
considering. Here are some questions to ask.
- How long have you been in business? Look
for a well-established company and check it out with
consumer protection officials. They can tell you if
there are unresolved consumer complaints on file.
One caveat: No record of complaints against a particular
contractor doesn’t necessarily mean no previous
consumer problems. It may be that problems exist,
but have not yet been reported, or that the contractor
is doing business under several different names.
- Are you licensed and registered with the state?
While most states license electrical and plumbing
contractors, only 36 states have some type of licensing
and registration statutes affecting contractors, remodelers,
and/or specialty contractors. The licensing can range
from simple registration to a detailed qualification
process. Also, the licensing requirements in one locality
may be different from the requirements in the rest
of the state. Check with your local building department
or consumer protection agency to find out about licensing
requirements in your area. If your state has licensing
laws, ask to see the contractor’s license. Make
sure it’s current.
- How many projects like mine have you completed
in the last year? Ask for a list. This will help
you determine how familiar the contractor is with
your type of project.
- Will my project require a permit? Most
states and localities require permits for building
projects, even for simple jobs like decks. A competent
contractor will get all the necessary permits before
starting work on your project. Be suspicious if the
contractor asks you to get the permit(s). It could
mean that the contractor is not licensed or registered,
as required by your state or locality.
- May I have a list of references? The contractor
should be able to give you the names, addresses, and
phone numbers of at least three clients who have projects
similar to yours. Ask each how long ago the project
was completed and if you can see it. Also, tell the
contractor that you’d like to visit jobs in
- Will you be using subcontractors on this project?
If yes, ask to meet them, and make sure they have
current insurance coverage and licenses, if required.
Also ask them if they were paid on time by this contractor.
A "mechanic’s lien" could be placed
on your home if your contractor fails to pay the subcontractors
and suppliers on your project. That means the subcontractors
and suppliers could go to court to force you to sell
your home to satisfy their unpaid bills from your
project. Protect yourself by asking the contractor,
and every subcontractor and supplier, for a lien release
or lien waiver.
- What types of insurance do you carry? Contractors
should have personal liability, worker’s compensation,
and property damage coverage. Ask for copies of insurance
certificates, and make sure they’re current.
Avoid doing business with contractors who don’t
carry the appropriate insurance. Otherwise, you’ll
be held liable for any injuries and damages that occur
during the project.
Talk with some of the remodeler’s
former customers. They can help you decide if a particular
contractor is right for you. You may want to ask:
- Can I visit your home to see the completed job?
- Were you satisfied with the project? Was it completed
- Did the contractor keep you informed about the status
of the project, and any problems along the way?
- Were there unexpected costs? If so, what were they?
- Did workers show up on time? Did they clean up after
finishing the job?
- Would you recommend the contractor?
- Would you use the contractor again?
Your Payment Options
You have several payment options for most home improvement
and maintenance and repair projects. For example, you
can get your own loan or ask the contractor to arrange
financing for larger projects. For smaller projects,
you may want to pay by check or credit card. Avoid paying
cash. Whatever option you choose, be sure you have a
reasonable payment schedule and a fair interest rate.
Here are some additional tips:
- Try to limit your down payment. Some state laws
limit the amount of money a contractor can request
as a down payment. Contact your state or local consumer
agency to find out what the law is in your area.
- Try to make payments during the project contingent
upon completion of a defined amount of work. This
way, if the work is not proceeding according to schedule,
the payments also are delayed.
- Don’t make the final payment or sign an affidavit
of final release until you are satisfied with the
work and know that the subcontractors and suppliers
have been paid. Lien laws in your state may allow
subcontractors and/or suppliers to file a mechanic’s
lien against your home to satisfy their unpaid bills.
Contact your local consumer agency for an explanation
of lien laws where you live.
- Some state or local laws limit the amount by which
the final bill can exceed the estimate, unless you
have approved the increase. Check with your local
- If you have a problem with merchandise or services
that you charged to a credit card, and you have made
a good faith effort to work out the problem with the
seller, you have the right to withhold from the card
issuer payment for the merchandise or services. You
can withhold payment up to the amount of credit outstanding
for the purchase, plus any finance or related charges.
Improvement" Loan Scam
A contractor calls or knocks on your door and offers
to install a new roof or remodel your kitchen at a price
that sounds reasonable. You tell him you’re interested,
but can’t afford it. He tells you it’s no
problem — he can arrange financing through a lender
he knows. You agree to the project, and the contractor
begins work. At some point after the contractor begins,
you are asked to sign a lot of papers. The papers may
be blank or the lender may rush you to sign before you
have time to read what you’ve been given to sign.
You sign the papers. Later, you realize that the papers
you signed are a home equity loan. The interest rate,
points and fees seem very high. To make matters worse,
the work on your home isn’t done right or hasn’t
been completed, and the contractor, who may have been
paid by the lender, has little interest in completing
the work to your satisfaction.
You can protect yourself from inappropriate
lending practices. Here’s how.
- Agree to a home equity loan if you don’t have
enough money to make the monthly payments.
- Sign any document you haven’t read or any
document that has blank spaces to be filled in after
- Let anyone pressure you into signing any document.
- Deed your property to anyone. First consult an attorney,
a knowledgeable family member, or someone else you
- Agree to financing through your contractor without
shopping around and comparing loan terms.
Getting a Written Contract
Contract requirements vary by state.
Even if your state does not require a written agreement,
ask for one. A contract spells out the who, what, where,
when and cost of your project. The agreement should
be clear, concise and complete. Before you sign a contract,
make sure it contains:
- The contractor’s name, address, phone, and
license number, if required.
- The payment schedule for the contractor, subcontractors
- An estimated start and completion date.
- The contractor’s obligation to obtain all
- How change orders will be handled. A change order
— common on most remodeling jobs — is
a written authorization to the contractor to make
a change or addition to the work described in the
original contract. It could affect the project’s
cost and schedule. Remodelers often require payment
for change orders before work begins.
- A detailed list of all materials including color,
model, size, brand name, and product.
- Warranties covering materials and workmanship. The
names and addresses of the parties honoring the warranties
— contractor, distributor or manufacturer —
must be identified. The length of the warranty period
and any limitations also should be spelled out.
- What the contractor will and will not do. For example,
is site clean-up and trash hauling included in the
price? Ask for a "broom clause." It makes
the contractor responsible for all clean-up work,
including spills and stains.
- Oral promises also should be added to the written
- A written statement of your right to cancel the
contract within three business days if you signed
it in your home or at a location other than the seller’s
permanent place of business. During the sales transaction,
the salesperson (contractor) must give you two copies
of a cancellation form (one to keep and one to send
back to the company) and a copy of your contract or
receipt. The contract or receipt must be dated, show
the name and address of the seller, and explain your
right to cancel.
Keep all paperwork related to your project in one place.
This includes copies of the contract, change orders
and correspondence with your home improvement professionals.
Keep a log or journal of all phone calls, conversations
and activities. You also might want to take photographs
as the job progresses. These records are especially
important if you have problems with your project —
during or after construction.
the Job: A Checklist
Before you sign off and make the final payment, use
this checklist to make sure the job is complete. Check
- All work meets the standards spelled out in the
- You have written warranties for materials and workmanship.
- You have proof that all subcontractors and suppliers
have been paid.
- The job site has been cleaned up and cleared of
excess materials, tools and equipment.
- You have inspected and approved the completed work.
If you have a problem with your home improvement project,
first try to resolve it with the contractor. Many disputes
can be resolved at this level. Follow any phone conversations
with a letter you send by certified mail. Request a
return receipt. That’s your proof that the company
received your letter. Keep a copy for your files.
If you can’t get satisfaction,
consider contacting the following organizations for
further information and help:
- State and local consumer protection offices.
- Your state or local Builders Association and/or
- Your local Better Business Bureau.
- Action line and consumer reporters. Check with your
local newspaper, TV, and radio stations for contacts.
- Local dispute resolution programs.