There are remodelers out there who don’t want to deal with a client’s financing. But that doesn’t mean contractors know what financing options are available to homeowners.
Home Loan Investment Bank in Warwick, R.I., is a national lender that provides financing for small- to medium-sized remodeling projects. The bank is one of two that offer funding for remodeling projects through the Federal Housing Authority (FHA) Title 1 Home Improvement Program. Title 1 loans are non-equity based government-issued loans through the FHA that do not require a home appraisal or equity for a client to obtain. Boston -based Admirals Bank (formerly known as Domestic Bank) also provides financing through this program.
The program, which was established right after the Depression, is the first federally backed home improvement or mortgage backed program. It offers up to a $25,000 loan for remodeling and home improvement projects on single-family homes. This includes projects such as window replacement, siding and roofing.
Ninety percent of Home Loan Investment Bank’s business is from contractor referrals; the other 10 percent is through customer referrals, the FHA and HUD (the U.S. Department of Housing and Urban Development).
“We currently have about 4,000 contracting and remodeling companies on a national basis that are approved or referred customers to us,” says John Kuprevich, vice president of Home Improvement Lending at Home Loan Investment Bank.
Home Loan Investment Bank devised a contractor referral program to educate remodelers on the Title 1 loan program and help them set up a referral network.
“We take the financing off of their desk. We handle that,” Kuprevich says. “They’re comfortable after working with us after one or two loans to know that we’re here to represent them in a professional manner and to make sure we are providing our financing as quickly as possible. And now they’re off to selling the next job or working the next job. That’s what we do, and we’re very good at it.”
Kuprevich explains that the bank performs due diligence on the remodelers who use this service. To work with the bank, contractors and remodelers must provide the bank with general information, including:
- The name of the business owner
- Contact information
- Proof of liability insurance
- A business license
- A listing of the types of home improvement projects they do
- Geographic location of where they work in the United States.
Once approved, the contractors and remodelers are assigned an account executive who educates them and provides a general overview on the terms and rates of the program.
“We offer conference calls and webinars to their sales staff so that everyone has a broad idea of what the program is about and can kind of talk about it while they’re in the house,” Kuprevich says.
The account executive manages both the consumer and the contractor remodeling source. Contractors can forward client information to the bank in a number of ways. A lot of the companies provide an estimate to a homeowner and find out if they can pay for the project before referring them to the bank. From there, the contractor can provide Home Loan Investment Bank with the homeowner’s contact information, give the homeowner the bank’s contact information, or can collect some general information and get authorization from the potential client to forward the information on their behalf—then the bank follows-up with them.
“What we do is financing, and that’s what we’re really good at, and what they do is home improvements, and that’s what they’re really good at,” Kuprevich says. “By each of focusing on what we’re good at, at the end of the day everybody is happy.”
Homeowners interested in obtaining funding through the FHA Title 1 home improvement program must have an estimate or contract to obtain a loan. The bank then pulls a credit report and checks over the customer’s financials before approving the loan. The credit rates for the loans are based on a homeowner’s credit score and the term they choose to pay off the loan, Kuprevich explains. The loan process takes up to two weeks to complete.
“We fund directly to the consumer for the project, and the consumer pays the contractor,” Kuprevich says. After a remodeling project is completed, the bank performs a post inspection on every job they finance.
Kuprevich added that Home Loan Investment Bank has been lobbying Congress to increase the loan amount for single-family residences through the FHA Title 1 Home Improvement Program because a lot of remodeling projects don’t qualify since they exceed $25,000. This includes projects such as kitchen and bath remodels, solar panel installation and geothermal projects.
“There’s been a significant need for it for many years,” Kuprevich says. “The price of the average addition is well over $25,000. Having a program that may go up to $40,000, maybe $50,000 is very advantageous to get this economy going.”
He believes the FHA will increase the loan amount within the next two years.—Amalia Deligiannis