12.15 CONSTRUCTION CONTRACTOR-BUILDER REQUIREMENTS (05/17/17)

Owned by Kacey Olson
Nov 17, 2018
2 min read

© RHS HB-1-3555 SFH Guaranteed Loan Program Technical Handbook

A key to the success of the loan feature will be the financial stability and reputation of the builder constructing the home. The approved lender and their agent, if any, will be responsible for approving participating builders. Each builder seeking to participate will be subjected to a process that involves license verification, insurance validation, credit examination, reference verification and a criminal background check. Minimum credit examination will include obtaining a commercial credit report on the business. Ownerbuilders are ineligible for this loan feature. Lenders are required to document their determination for eligibility of the builder to participate in the Rural Development mortgage transaction as further described in Handbook Chapter 15, Section 15.2.

Construction contractors or builders of homes financed with the single close loan must have:

  • Two or more years of experience building and constructing all aspects of single family dwellings similar to the type of project being proposed;
  • Evidence of a state-issued construction or contractor license, as required by state law or local law;
  • Evidence of commercial general liability insurance with a minimum coverage of $500,000;
  • The builder/contractor must have an acceptable credit history being free of open judgments, collections or liens related to previous construction projects. An individual credit report is required in addition to a commercial report on the business;
  • The builder/contractor must not have a previous felony criminal record. A background check will be performed by the approved lender;
  • A builder may be limited to an Agency determined number of units, or terminated from participating in this program due to poor workmanship or failure to meet program guidelines;
  • Contractors or builders who are constructing their own residence are ineligible.

The lender is representing the builder meets the criteria of this paragraph when requesting a commitment for loan note guarantee.