Sweat Equity in Longmont, CO
If you want a way to reduce your down payment, put a little elbow grease into your efforts. In some instances, a lender can credit your home improvement efforts toward your down payment. The work performed or materials furnished may be applied as equivalent to a cash investment for either existing properties or new construction. Before moving forward, listed below are some requirement you may want to consider before moving forward as a homebuyer using sweat equity in Longmont, CO:
Only work listed on an appraisal or sales contract are acceptable forms of sweat equity in Longmont, CO. Work that is completed prior to that is not eligible. All work must start after appraisal and finish before closing. It is also important to note that the value of your work must be verified through an unrelated third party bid for the same service that is being performed. Once the bid is on file with the lender, the loan processor will evaluate the cost estimate.
This program only applies to the home you are purchasing. The compensation for the work performed on other properties must be in cash and properly documented.
Simple clean-up, such as debris removal or general maintenance are not acceptable forms of elbow grease for your down payment. While it will improve the property's appearance, there is no benefit to the structure of the property to be considered "sweat equity". It is important to document your ability when performing work that requires certain expertise. For example, if you're completing electrical or plumbing work, a license is required or a family member that is licensed can donate their services.
There can be cash back to the homebuyer on these improvements. They must be listed in an acceptable improvement and payments made to the vendor must be for the specific amount of the improvement.
Lastly, you must document the source of money used to purchase your materials, plus their market value, and you must also maintain receipts for the materials that were purchased.