There are many reasons why you might be interested in hiring a home contractor. These professionals are an important part of helping someone attain their dream home. While everyone cares about the price of the contractor, this is not the only factor that you should consider.
After all, the home is where people spend a lot of their time. By thinking about price alone, you might be sacrificing quality. It is important for you to take the proper steps when it comes to hiring a home contractor. Hiring a home contractor in Oregon doesn’t need to be an overwhelming ordeal. Here are a few factors that you should keep in mind. Using these tips should help you with your contractor hiring process. These tips can be used no matter what city in Oregon you happen to live in. Regardless of whether you’re in Portland, Medford, or Beaverton, these tips should still come in handy.
- Determine a budget
- Figure out how you will finance your project
- Conduct phone and in-person interview
- Determine a payment timeline
- Put every detail in writing
- Start the process with a detailed planned
- Give the project specifications upfront
- Ask about insurance
- Ask for client references
#1. Determine your Budget Before Getting Started
With the cost of construction skyrocketing over the past few years it is really important to determine what you are willing to spend and whether your desired outcome aligns with your budget. Starting with an architect or designer prior to doing research can often lead to disappointment as some architects and designers vastly underestimate the cost of the work they are proposing. With a home renovation, you can easily run into unexpected costs once you get below the surface of the house, so it’s important that the known work you want done fits comfortably in your budget and is not a stretch in the beginning.
Since the cost of construction can vary greatly depending on location and finishes, it’s important to do research both online and by talking to local experts. For example, the cost of building in Portland, Oregon will be significantly higher than the cost of building in eastern Oregon or less urban areas. If you are into the current home renovation shows, take into account that the cost of living is higher in the Pacific Northwest so the cost of your home renovation project is going to be higher than the home projects representing on the home.
#2. How Will You Finance Your Home Construction Project
Before you hire a contractor, architect, or designer you also need to figure out how you will finance the work being done. Other than self-funding the project, there are typically three home renovation comes with three financing options.
The first and easiest option is to open a Home Equity Line of Credit or HELOC. A HELOC is a second lien with a set credit limit that acts similar to a credit card, but with a lower rate. With a HELOC you only pay interest when you borrow from the line. They also are usually free to set up through your local bank or credit union. Terms for equity lines vary, just like a regular mortgage so it’s important that you compare different options. In general, you should be able to borrow up to 85-95% of the value of your home and the rate will be around the Prime rate but will be variable. While this is most likely the cheapest and easiest option upfront, it does have a longer-term interest rate risk so it’s vital that you discuss your exit strategy with a qualified mortgage professional before you max out your line of credit.
The second option and often the best way to go if you have enough equity built up in your home is to do a cash out refinance. With a cash out refinance, you can refinance your existing mortgage and take out additional equity, usually up to 80% of the value of your home if you have an FHA, Conventional, ARM, or USDA home loan. VA cash out refinances allow you to borrow up to 100% of the value of your home. If you have the equity, this will likely be the best option as the rates and costs are lower than renovation loans. Cash out refinances also allow you to lock in a rate just like a normal refinance or purchase with a 30-year fixed-rate mortgage. Shorter terms such as a 25, 20, 15, and 10 year fixed are also available. The other advantage is you won’t need lender approval during the construction process. The downside to this option is you are borrowing and paying interest on the full amount upfront. If you don’t plan on starting construction in the near future this may not be the best option. To offset this risk, you can get pre-approved with your mortgage company and then coordinate closing to line up closer to the start of construction. The one thing you want to avoid at all costs is to starting construction prior to closing a cash out refinance as you cannot do this type of financing while construction on your home is being done.
The last option is a home renovation loan. If you don’t have enough equity in your home to get the cash you need to complete the project this is likely to be your best option. The advantage of a home renovation loan is the lender will base the amount they lend to you on the expected value of the home once the work is finished. Downsides to this type of financing are that interest rates and upfront costs are usually higher than conventional financing and require the approval of not only the borrower but the approval of the contractor and the upgrades being done to the home. With a construction loan, the mortgage lender is usually involved throughout the construction process.
#3. Start the Process with a Detailed Plan
This is the step that absolutely should be completed before you approaching a contractor. If you need help with designing a plan, think about reaching out to a designer or an architect who can assist you. And when you’re ready, walk your contractor through your plan step by step. This will help the contractor give you a more accurate price estimate and will allow the contractor to ask important questions.
#4. Conduct a Phone and in Person Interview
Before you make a decision to hire a home contractor in Oregon, be sure to conduct both a telephone and in-person interview with your prospects. No matter what sort of recommendations or references your prospects may have, you should also consult with your potential contractor over the phone and in person before making a final decision. Just because a contractor has raving reviews it doesn’t always mean they will be someone you will work best with so conducting these interviews will assist you in getting a sense of whether a particular contractor may be a good fit.
#5. Ask About Insurance
It is also important for you to make sure your contractor has insurance. The contractor probably has a large crew that he or she needs to work with to help your project come together. Even though you’d hope accidents wouldn’t occur, mishaps do happen and your contractor needs to be set up to deal with these issues professionally.
#6. Ask for Client References
It is important for you to take a look at some of your home contractor’s previous work. Take a look at some of the prior projects and make sure you are satisfied with what you see. This will help you get a solid idea of what your project might look like when all is said and done.
#7. Determine a Payment Timeline
As mentioned, you shouldn’t make a hiring decision solely based on price alone. But one factor that may influence your hiring decision has to do with the payment schedule you develop with your contractor. When considering a prospective contractor, ask about how they expect payment to be made and make sure you are comfortable with the payment plan. If your potential contractor is asking for significant amounts of the estimated cost upfront make sure you trust their business ethics and the quality of the workmanship. It is very common that the contractor will be paid immediately after the project is complete.
#8. Put Every Detail in Writing
Before you hire your contractor to make renovations or to build your new home in Oregon, be sure to put every detail of your agreement in writing. Many times, homeowners think that a verbal contract is adequate when they engage a contractor, but the truth is that verbal agreements leave more room for error and misunderstanding. When you’re dealing with the specifications for your new home in Oregon, you want things to be as clear and concise as possible. Put everything into writing so that nothing can possibly be mistaken or misunderstood.
#9. Give the Project Specifications Upfront
There are certain details and upgrades that you might want in your home. Save your time, as well as the contractors, by providing are specifications as early as possible. That way, the contractor can figure out how much each of these specifications is going to cost and give you an accurate estimate of the amount of time and cost it will take to complete your home renovation.
Ready to get started?
There you have it, our nine tips for choosing a home contractor in Oregon, and we hope you find them useful and that your search for a contractor goes smoothly. If you are ready to get started building or renovating your home in Oregon, contact Sammamish Mortgage, our mortgage specialists are knowledgeable and available to answer all of your home construction financing questions. Sammamish Mortgage currently lends in all of Washington, Oregon, Idaho, and Colorado and offers a wide variety of mortgage programs and tools with flexible qualification criteria.