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Profile picture for midnightflyer49

what is a improvement fee when applied to a mortgage?

We applied for a building loan from the bank and they tacked on an "improvement fee" of $1,200 to the paperwork we are to sign.  What is an "Improvement fee"?
  • November 21 2012 - US
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Answers (1)

Profile picture for Gulf StatesFinancial
Several years ago I specialized in construction loans all over Florida and without seeing the GFE or HUD-1, I can tell you this is most likely something similar to a "construction administration fee" or "construction management fee".  The primary purpose of this kind of fee is to monitor the builder's progress when the builder does a draw request from the bank.  The inspections are typically done by skilled individuals who know what to look for and they will typically make 6-10 visits over 6-18 months and that is primarily why the fee isn't cheap.  The overall purpose is to make sure the builder is completing items per the draw schedule and is built-in to protect you.  This can be a third part charge or something the bank handles themselves.

If I am correct on identifying the purpose behind the charge, they have just chosen a poor description.  I think if you ask you LO they will gladly explain.  Hope that helps and we wish you the best with your project.

 



     
  • November 22 2012
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