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For many homeowners, the choice between expanding their current home and buying a new one is difficult. Financing it can be a hassle in this economy. But have you considered the benefits of a surety bond?

In efforts of keeping roots planted, many homeowners eventually decide to renovate their current home to suit spatial needs. Whether the family needs an additional bedroom or simply more space, a home renovation and expansion can be a big project requiring the need for a specialized contractor who can perform and supervise the work properly.

However, with rampant nightmare stories of how homeowners received terrible workmanship or even uncompleted renovations, how do you get assurance from a contractor that the job will be completed – and completed properly? A little investment on your part in a surety bond can help assure that your home renovation gets completed as agreed contractually.

What is a Surety Bond?

Surety bonds were developed as early as Egyptian times to help protect the interests of landowners or property owners, as well as ensure that work on the land was completed as agreed. In today’s time, a contract performance surety bond fills the same role. A surety bond involves a neutral third party to help assure that contract work is completed as agreed and on budget.

A surety bond has three parties: the principal, who is the contractor performing the work; an obligee, who is the receiver of the work; and a surety who ensures all obligations are performed from all parties.

Where Do I Get a Surety Bond for My Renovation?

The surety bond is generally purchased through an insurance company. Insurance companies are in the business of underwriting and enforcing contractual obligations. They also are experts at risk assessment and risk avoidance. What better place to get help with such a potentially risky activity as home renovation than from a group that tries to avoid risk at all cost?

An insurance company can also help filter and screen contractors. They will assess the risk of each one as determined by past performance, financial resources, and access to the appropriate equipment. With this extra help in obtaining the best contractor, you can be more assured that the job will be performed by the best qualified contractor.

Though insurance companies often will provide surety bonds, they are not an insurance policy. An insurance policy transfers risk to the insurance company, who will pay an agreed amount in the case of unforeseen circumstances. A surety bond, however, is quite tangible. The outcome is known, predictable, and controllable. Some insurance companies will even offer surety bonds that provide the obligee with a penal sum, or prescribed dollar amount, if the contract is unfulfilled by the contractor.

State it in the Contract

Since a surety is there to see that all contractual obligations are met, it is best to get everything you want stated in your contract with the builder or contractor. Even a little time spent with your attorney to draw up a document with all your needs can be money well spent.

It is not always enough to state that you agree with a contractor to build an addition to your home. Be as specific as possible on the outcome. Do you want all work to exceed building codes? Do you want extra waterproofing to assure that the new addition will be leak-free? What type of construction materials do you want incorporated in the addition? The more specific you can be in the contract, the better your surety can serve you when they see that the contract is fulfilled.

Building an addition to your home is a big project. You can help protect your home investment and also help avoid disaster with a good surety bond from a reliable company. Also, visit the SBA surety site for more info.

If you are I the market for a new home have you considered the potential for possible future flood damage to the property? For those veterans using the VA Home Loan Guarantee Program, it is required by the VA for the buyer to pay the fee for a determination of flood risk on the property they are planning to purchase.

FEMA has a National Flood Insurance Program so that if the home you purchase is determined to be in a flood area, you can get insurance to protect you. They warn that flood insurance is not usually covered by homeowner’s insurance. Most people would think that home owner’s insurance covers all natural disasters, but flood are not covered even though they are the leading natural disaster in the U.S.

Some more facts that you should know about flood hazards before you purchase a home are:

• According to FEMA, close to 25% of all the claims made in their flood insurance program are from areas that were considered a minimal flood risk. This is why it may be important to have flood insurance even if your risk of flooding is low.

• The FEMA flood insurance program has a 30 day grace period before insurance coverage goes into effect, so make sure and get coverage before you need it.

• According to FEMA, everyone lives in a flood zone. Water levels can rise and flood anywhere, it is just a questions of the risk of it happening to your property.

• The amount of risk is what is determined when looking at if you are in a flood zone or not. If you are considered to be in an official flood zone where your risk is high, then you will be required by your lender and the VA to carry flood insurance which is an added expense to you and your family.

• The VA requires a third party representative who is not personally invested in the property or parties involved to do the flood zone determination.

For more information on the FEMA flood insurance program, and to see how high risk your property is for flood damage go to FloodSmart.gov.

When it is time for a person to purchase a home many things need to be considered in order for it to be affordable.  The largest expense for an average family is their housing costs.  When you purchase a home it will probably be the largest purchase you will ever make which makes it extremely important to give a lot of thought to what you can afford, and these FHA home financing ideas may help.

Even though you may qualify for a large loan that does not mean that you want to take that amount.  There are factors that mortgage lenders do not consider about your lifestyle and money choices that you need to think about when considering how much you want to pay into your monthly housing payment.  Here are some things you should always consider when taking out a mortgage loan:

•    How much can you really afford?  If you are approved for a $400,000 loan do you really want to purchase a $400,000 home?  Along with that large price tag comes large tax bills, maintenance, and depending on the area you are in, it may take a while for you to sell a high priced home in the case you choose to resell the house.
•    What type of lifestyle do you enjoy?  Many people are house poor because they allowed themselves to get carried away and take a large loan amount that they can barely afford.  Now they better like the home they purchased because they are not going to be going out much because they are spending all their extra money on their home.  If you enjoy eating out, vacationing, shopping, or other luxuries that are costly make sure you consider these expenses when you are budgeting how much you can afford for your monthly mortgage payment.
•    Do you have any expensive hobbies?  If you like to go boating, skiing, sky diving, or any other costly extra curricular activities you should consider these as expenses when you are tabulating how much of a mortgage payment you can afford.  The more pricey the hobbies you have are, the less money you should spend on your home unless you are willing to give them up.
•    How secure is your job, and do you work in a field where jobs are readily available?  If you are not sure about what your employment status will be in the future, you should consider taking out a mortgage that will be affordable even if you have to take a lower paying job.  This will also allow you to save up some rainy day money in case you are unemployed for any period of time.
•    How much do you need to save for the future?  Consider how much a month you would like to put away for savings, retirement, and other long term goals.  Figure your monthly budget without this money when you are considering how much to spend on your mortgage payment.
•    Do you have a large family or expect to start a family?  Children are extremely expensive at all ages.  Once you have children you may want to begin college funds, take out larger amounts on your life insurance policies, or other family related expenses that you may not have right now.  Consider future expenses when you are budgeting for your monthly mortgage payment.
•    Think of any future expenses.  Are you going to get insurance for your mortgage in case something happens to you like death or disability?  Are you planning to get a new car payment soon, and with that how much will your car insurance increase?  You should always keep in mind possible expenses in the future in order to really be prepared for your financial circumstances and know how much home you can afford.