Remodeling and Home Design

Warning Signs During Interviews

Avoid a remodeler at all costs when:

  • You can't verify the name, address, telephone number or credentials of the remodeler.
  • The salesperson tries to pressure you into signing a contract.
  • The company or salesperson says your home will be used for advertising purposes so you will be given a "special, low rate."
  • The builder/remodeler tells you a special price is available only if you sign the contract "today."
  • No references are furnished.
  • Information you receive from the contractor is out-of-date or no longer valid.
  • You are unable to verify the license or insurance information.
  • You are asked to pay for the entire job in advance, or to pay in cash to a salesperson instead of by check or money order to the company itself.
  • The company cannot be found in the telephone book, is not listed with the local Better Business Bureau, or with a local trade association, such as NARI.
  • The contractor does not offer, inform or extend notice of your right to cancel the contract within three days. Notification in writing of your Right of Recission is required by law. This grace period allows you to change your mind and declare the contract null and void without penalty (if the agreement was solicited at some place other than the contractor's place of business or appropriate trade premises-in your home, for instance.)

In addition, be cautious when:

  • You are given vague or reluctant answers.
  • The contractor exhibits poor communication skills or descriptive powers.
  • The contractor is not accessible.
  • Your questions are not answered to your satisfaction.
  • The contractor is impatient and does not listen.
  • Only the work is addressed, instead of your needs as the homeowner.
  • There is no way to see previous projects, either through a presentation book, an online presentation or via the company's Web presence.

Information provided by www.nari.org.

Money-the one thing that causes more disagreements and stress than just about any other entity. Luckily, creating a budget for your home improvement project does not need to be intimidating or cause World War III in your living room. Just take this simple crash course in everything you need to know about remodeling finance:

How Much Can You Afford?

This question alone is enough to strike fear into anyone's heart. The truth is not many people enjoy establishing a remodeling budget-and many just don't. Many homeowners prefer to call a remodeling contractor and expect him or her to create the budget for them, which is not the best way to begin. How do you start off right? You can begin by taking these four easy steps in the right direction:

Step One: Decide how long you plan on staying in your home. The length of time you intend to stay in a home will affect how much money you should invest in it. If you are going to stay in the home for more than ten years, you should spend as much as you are able to create the home of your dreams. However, if you are planning on moving in the near future, you should take care not to over-build for your neighborhood. Look into the real estate comparisons for your area and keep your investment in line with the average home sales price. You don't want to invest thousands of dollars you won't be able to recoup at closing.

Step Two: Make a list of all your debts. You should include any debts you pay on a monthly basis, such as mortgages, car loans, credit cards, and any other items with a fixed monthly payment. This list should not include payments for groceries, utilities, telephone services, or other general expenses. Call this list your monthly expenses.

Step Three: Determine your total gross monthly income. Include all sources of income that you would list on a loan application.

Step Four: Complete the following worksheet to determine how much you can afford to pay for your remodeling project on a monthly basis. These formulas are used when the remodeling project is going to be financed. Warning: Cash is not always the best option!

Calculations 101

Step 1 - DTI

Lenders use a simple Debt-to-Income (DTI) ratio to determine if a homeowner can afford the additional debt of a remodeling project.

DTI

Enter Your Total Monthly Expenses $                     

Add the Estimated Monthly Payment for the Remodeling

Project + $                     

Total = $                     

Divide the Total by Your Gross Monthly Income... $                     

DTI % =                     

Each lender will approve loans at a specific DTI percentage (most lenders will tell you what their set DTI ratio is, if you ask). For example, if the lender accepts DTI ratios of 45 percent and your DTI ratio is 30 percent, your loan would be approved. However, if your DTI ratio is 55 percent, you would need to find other financing options. Perhaps your lender offers debt consolidation loans that could reduce your DTI ratio, which brings us to the next step:

Step 2 - The Maximum Payment

The next step is to determine the maximum monthly payment you can afford for remodeling. Multiply your monthly gross income amount by the lender's maximum DTI allowance, and subtract your current total monthly expenses, excluding the estimated remodeling payment.

Gross Monthly Income $                     

Lender's DTI ratio x                     

Subtotal = $                     

Total Monthly Expenses - $                     

Maximum Affordable Payment = $                     

If the last line is negative, you will not be able to borrow from that lender. See step 3 for further options.

STEP 3 - Consolidation

If your DTI ratio was above the lender's accepted percentage, or if your maximum affordable payment was too low, you may want to consider a debt consolidation loan. This would incorporate your current debts into the home improvement loan. Not only does this allow you to roll your debts into what may be a tax deductible loan, it also provides one easy payment for your debts and lowers your DTI percentage. In addition, the interest rate on a debt consolidation loan may be lower, which will save you additional money.

- See more at: http://www.nari.org/homeowners/news/article.asp?SECTION_ID=1&ARTICLE_ID=5&F_CATEGORY_ID=11#sthash.1katoxzf.dpuf
Budgets 101

Saturday, April 28, 2007



Money-the one thing that causes more disagreements and stress than just about any other entity. Luckily, creating a budget for your home improvement project does not need to be intimidating or cause World War III in your living room. Just take this simple crash course in everything you need to know about remodeling finance:

How Much Can You Afford?

This question alone is enough to strike fear into anyone's heart. The truth is not many people enjoy establishing a remodeling budget-and many just don't. Many homeowners prefer to call a remodeling contractor and expect him or her to create the budget for them, which is not the best way to begin. How do you start off right? You can begin by taking these four easy steps in the right direction:

Step One: Decide how long you plan on staying in your home. The length of time you intend to stay in a home will affect how much money you should invest in it. If you are going to stay in the home for more than ten years, you should spend as much as you are able to create the home of your dreams. However, if you are planning on moving in the near future, you should take care not to over-build for your neighborhood. Look into the real estate comparisons for your area and keep your investment in line with the average home sales price. You don't want to invest thousands of dollars you won't be able to recoup at closing.

Step Two: Make a list of all your debts. You should include any debts you pay on a monthly basis, such as mortgages, car loans, credit cards, and any other items with a fixed monthly payment. This list should not include payments for groceries, utilities, telephone services, or other general expenses. Call this list your monthly expenses.

Step Three: Determine your total gross monthly income. Include all sources of income that you would list on a loan application.

Step Four: Complete the following worksheet to determine how much you can afford to pay for your remodeling project on a monthly basis. These formulas are used when the remodeling project is going to be financed. Warning: Cash is not always the best option!

Calculations 101

Step 1 - DTI

Lenders use a simple Debt-to-Income (DTI) ratio to determine if a homeowner can afford the additional debt of a remodeling project.

DTI

Enter Your Total Monthly Expenses $                     

Add the Estimated Monthly Payment for the Remodeling

Project + $                     

Total = $                     

Divide the Total by Your Gross Monthly Income... $                     

DTI % =                     

Each lender will approve loans at a specific DTI percentage (most lenders will tell you what their set DTI ratio is, if you ask). For example, if the lender accepts DTI ratios of 45 percent and your DTI ratio is 30 percent, your loan would be approved. However, if your DTI ratio is 55 percent, you would need to find other financing options. Perhaps your lender offers debt consolidation loans that could reduce your DTI ratio, which brings us to the next step:

Step 2 - The Maximum Payment

The next step is to determine the maximum monthly payment you can afford for remodeling. Multiply your monthly gross income amount by the lender's maximum DTI allowance, and subtract your current total monthly expenses, excluding the estimated remodeling payment.

Gross Monthly Income $                     

Lender's DTI ratio x                     

Subtotal = $                     

Total Monthly Expenses - $                     

Maximum Affordable Payment = $                     

If the last line is negative, you will not be able to borrow from that lender. See step 3 for further options.

STEP 3 - Consolidation

If your DTI ratio was above the lender's accepted percentage, or if your maximum affordable payment was too low, you may want to consider a debt consolidation loan. This would incorporate your current debts into the home improvement loan. Not only does this allow you to roll your debts into what may be a tax deductible loan, it also provides one easy payment for your debts and lowers your DTI percentage. In addition, the interest rate on a debt consolidation loan may be lower, which will save you additional money.

- See more at: http://www.nari.org/homeowners/news/article.asp?SECTION_ID=1&ARTICLE_ID=5&F_CATEGORY_ID=11#sthash.1katoxzf.dpuf
To help consumers through the process, NARI's website at www.RemodelToday.com offers many tips under the "Home Owners" section and also offers a search engine to help locate a contractor or chapter in your area.  NARI also offers a free brochure, "How to Select a Remodeling Professional," to consumers who call (402) 331-1718 or complete the feedback form on the last page of this website.

The National Association of the Remodeling Industry (NARI) is the only trade association dedicated solely to the remodeling industry.  With more than 5800 members nationwide, the Association -- based in Des Plaines, Illinois,  -- is "The Voice of the Remodeling Industry"TM.  For membership information, contact the local NARI office at (402) 331-1718.
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