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The process of finishing your new home is a combination of action and paperwork. Of course, you need the house to be ready for you and your loved ones to inhabit, but it also needs to be ready for the bank as well as the city or county. Unless you chose to be your own contractor, you'll heavily rely on your contractor to help you through this final process.
Getting your certificate of occupancy
Obtaining your certificate of occupancy (C of O) is the first step toward finishing your house. City and/or county building inspectors have been visiting your property regularly to inspect and sign off on the foundation, electrical, plumbing, and other key components. When the house is nearly finished, the building inspector will come out for the final inspection. In most areas, the inspector isn't concerned with minor deficiencies in workmanship, quality, or cosmetic issues such as paint, flooring, or window coverings. He is focused on making sure that the house meets all the structural and safety guidelines required by the local building code.
 | The contractor generally calls for this final inspection a few days in advance of being ready. Take the opportunity to walk the house with the contractor the day before the building inspector arrives. Have the contractor explain and show you all the items the building inspector will be looking at. This information can give you the chance to clearly understand the process and check up one last time on the contractor's work. If you see any defects, this is a good chance to point them out so the contractor can have the subs fix them. |
After the inspector reviews the house and is satisfied that it meets all local building codes and requirements, he files the approval with the county or city. The building inspector's signature of approval allows the building department to issue the C of O. This document allows you to move in and will be critical for other parties, such as your bank and the tax assessor. It means that your house officially and legally exists.
 | If the inspector decides the house isn't finished, you have two options: |
- You can wait until the contractor performs all necessary tasks to meet the final inspection.
- You can have the inspector issue a temporary C of O allowing you to live in the house while the necessary tasks are completed. (A temporary C of O can be beneficial if you've already sold your original home and scheduled moving trucks and utilities.) This option may not be available in every area of the country; check with your local building department.
In either case, the building inspector has to come back to the house to inspect all the work.
Obtaining the mechanics' lien releases
After the C of O is in hand, you need to wrap up all the house's financial details. All workmen have the right to attach liens — legally enforceable financial claims — to the property if they aren't paid for their services. Many of your suppliers and subs will have issued preliminary filings, which put everyone on notice that work has been done or materials have been delivered to the property. Preliminary filings — which allow the contractor and subs to file their mechanic's liens instantly if you don't pay them — have been happening during the entire construction period. In order to eliminate the risk of these preliminary filings turning to mechanic's liens, you need to obtain a lien release from each and every sub and supplier as well as your contractor. They'll only issue the release if everything has been paid for accordingly.
| The best way to handle lien releases is to collect them as you move through the process. If the contractor has been collecting them, make sure she provides you copies along the way. Keep careful files so you have the lien releases immediately available when needed. |
 | Mechanic's liens can be problematic for your loan and your finances. Don't dispute contractors or subs by withholding their funds. Pay them if possible and sue them after the fact. Doing so allows you to clear the title on the property and resolve the disputes independently. |
Rolling the construction loan — Choosing a final loan amount and program
Time to finish up the financial issues. Most likely, you've selected a single-close, all-in-one construction loan and are ready to roll it to a permanent mortgage. This type of loan requires a certain amount of paperwork to get the lender moving on the conversion process.
Here are the items your lender will need to start the rollover:
- Final draw request: Your lender probably set aside 10 percent of the funds in the loan until everything was finished. You can now request the money.
- Final lender inspection: After you have requested the last of the money, your lender will want the inspector to come out and make sure the work has been done according to plan. Be aware that the building inspectors aren't looking at the work quality.
- Copy of recorded C of O: The lender doesn't finish the loan without the certificate of occupancy.
- Lien releases: The lender's security is at risk until all contractors and subs are paid and have released the property. You need everyone to sign a release.
- Verification from the title company: The property is the only guarantee the lender has in case you default. Your lender wants the title company to reaffirm that the property is still yours and that no other liens or restrictions take precedence over the loan.
- Evidence of insurance: Now that you have a home, you need to obtain a homeowner's policy. Call your insurance agent and tell him you need a policy covering replacement value for the improvements.
As soon as you've collected all these items and given them to the lender, you may have the option of changing loan programs or changing your interest rates — of course depending on your lender and the loan program you selected.
If the final terms of the loan are insufficient for your needs or if you're rolling from a straight construction loan, you still need all these items to pay off the construction lender. Furthermore, you also need to find a lender for a refinance.
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