HomeStyle – Contractor Requirements

HomeStyle Contractor Requirements

The documents outlined below must be provided on all HomeStyle renovation loans:

  • The Homeowner/Contractor Agreement.
  • Detailed bid of renovation work to be completed.
  • Notice to Contractor.
  • Copy of state business license or proof of contractor by trade.
  • In states where there are no licensing requirements, the lender will require proof of trade (such as company letterhead, company business card, or occupational license)
  • Executed IRS W-9 form. This must be collected for every contractor or vendor providing services. A check request will not be released unless a W-9 has been provided.
  • Proof of general liability and worker’s compensation insurance, if applicable. If the borrower changes contractor(s), prior to the close of the loan, the above documentation must be resubmitted for the new contractor. HomeStyle mortgages cannot be approved or closed without a validated contractor.

Plans and Specifications For HomeStyle Renovation Loans

Renovation loans require plans and specifications (detailed bid/work writeup) to document and evaluate the quantity, quality, and cost of the renovation work that is to be done and to determine the amount of financing that will be available. The plans and specifications (detailed bid/work write-up) must be prepared by a registered, licensed, certified general contractor or Architect.

The specifications of repairs and corresponding bids, if applicable, are reviewed by an underwriter prior to final loan approval. Any descrepancies must be addressed prior to final loan approval.

HomeStyle Insurance Policy Requirements

The following are three types of insurance policies the builder may carry:

  • Liability
  • Workers Compensation
  • Builder’s Risk/Course of Construction

Each contractor must complete a Renovation Contractor Statement. The Statement contains an insurance section the contractor must complete. The contractor must:

  • Certify exemption from any state/local jurisdiction requirements to carry either Liability or Workers Compensation insurance, or
  • Provide the name of the carrier, agent name and phone number.

Builder’s Risk/Course of Construction insurance must be obtained by either the contractor or the Borrower. See Hazard Insurance Requirements. An insurance declaration page must be obtained naming the lender as a loss payee.

The expiration date for all insurance policies must extend 60 days beyond the date of the renovation contract, including approved project extensions. There can be no lapse in coverage.

Each HomeStyle Renovation loan must meet the secondary market Hazard Insurance Policy Requirements. HomeStyle loans require coverage in an amount at least equal to the “as is” value at closing.

Once the home is complete, insurance coverage must be increased to cover the “as improved” value.

If the contractor does not carry Builder’s Risk Insurance, the borrower must either obtain Builder’s Risk Insurance or provide insurance coverage that is broader than those perils typically covered under a standard Homeowners insurance policy, including a provision for loss of building materials which have not yet been permanently attached to the dwelling.

The borrower or the contractor may secure this insurance. The HomeStyle Homeowner/Contractor Agreement must be completed to evidence which party will cover the construction liability insurance. If the contractor’s insurance is used, a copy of the insurance policy clearly reflecting acceptable coverage through scheduled completion must be obtained as part of the Lender’s “Contract Requirements” process.

The HomeStyle “self-help” policy is substantially different from the FHA self-help policy

  • The borrower may not act as the general contractor unless it is his or her full-time occupation.
  • If the borrower is a contractor, he or she cannot contribute sweat equity. All labor contributed by the borrower or borrower’s employees cannot be reimbursed, nor can an amount for the borrower’s or borrower’s employees’ labor be included in the loan amount. If the borrower later cannot perform the work, he/she will need to pay for the added labor expense using his/her own funds.
  • A HomeStyle Self-Help Agreement must be executed when the borrower, who is a contractor by trade, is acting as the general contractor. This agreement should be  executed at the time of application.
  • Principal, Interest, Taxes, Insurance (PITI) reserves are required for all “self-help” transactions.


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