Things to Look for before Signing Construction Contract

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construction contractYou decided to build a house and talk to several builders and contractors and compare their cost and estimates. After you chosen the right contractor for your house, the builders or contractors will provides a construction contract based on your verbal agreement. This agreement includes the floor layout, home finishes and fixtures, materials specification and time frame.
It is advisable to review and understand the construction before signing. If you are not knowledgeable about the standard specification for your house, you can get the help of the expert.

Here are some things to look for before signing a construction contract:

1. Scope of Work

It describes the work agrees to perform by the contractor from the beginning such obtaining building permit, furnishing labor, materials, equipment and other services for the construction of the house. It also contains the drawing and specification to be used that should conform to house plan.

2. Specification of Material

It contains the specification of the materials to be used in the construction. Consider hiring professional to review the plans and specification to make sure that the contractor put the right specification on your house.

3. Time Frame

Time when the house construction will be completed should be indicated in the contract. The schedule of work should follow by the contractor. Cause of delays includes poor weather, delay payment of the owner, inspection delay by the municipal, labor strikes and other issues.

4. Payment

The terms of payment should be included in the contract so that the owner may know when and how will pay the contractor. It indicated the payment schedule so that the house may built in a timely manner. A regular contract will require an initial payment prior to construction. A contractor may also submit a report of work completion to the owner and this will be the basis for the payment.

5. Warranty

The contract may contain the type of defects that will take care of the contractor later after the construction. It indicated how long the warranty lasts and type of maintenance obligations of the owner and what the contractor requires to fix the defects if any.

Tips on Getting Home Loan Approved

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approve loanEveryone wants to have their own house but the problem is they do not have enough money for the construction of their house. Of course, before thinking of constructing, it is advisable to get or purchase a lot for the location of your dream house. But some are planning to buy house and lot in the loan basis.
Some person get financial help to banks and other financial institution in order to construct their house or buying a house and lot but the problem is they do not have any idea on how to start a mortgage loan.

Here are some tips to get your home loan approve:

1. Determine your credit score.

It is important and necessary to investigate and know your credit score before applying for the home loan. A high credit score have chances that your home loan application can be approve quickly. Credit scores and credit activity may have impact on loan approvals. A low credit score and credit fraud may deny your loan application.

2. Have some cash

It is a good idea to save cash before applying for home loan because chances are some financial association or banks requires the applicant to pay such as insurance payment, processing fee. If you have zero cash, you loan application might be rejected.

3. Get Pre-Approve d for Home Loan

The pre-approval process will help you decide how much you can afford and you can decide what type of house you should look for. Just need to submit financial and personal information to the lending institution and wait for the response

4. Recognize what you can afford

Analyze your income and expenses so that you will know how much you can afford. Knowing the in and out of money will make you determine how much money is available for your future monthly amortization. Do not believe easily when your lender said that you can afford that amount of money because they did not know how much you spend in everyday needs such as gas, groceries, allowance, etc. Lenders only depend on their computed amount to your income and credit report.

5. Do not quit to your job

During the application, you should stay for your job because any changes in employment or income status may delay or even reject your home loan application. Quitting to your job and changing your status to self-employed will greatly affect your loan application and lender may re-check  your finances if you are still qualifying for the loan.

6. Clear your debt and avoid new debt

The less you owe your creditors the better when applying for the home loan. Your debt will determine if you get a loan and how much you will acquire from your lender because your lenders will evaluate your debt-to-income ratio before approving your application for loan. It is crucial to avoid new debt while applying for the loan because lender may re-check your application before approving your loan. Prevent from major purchasing such as financing new car or home appliances because if you have a high debt ratio, your request might not be granted.

Choosing Contractor for your House Construction

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contractor constructionYou finally decided to have your own house but the problem is who will build your house. We know that it is very difficult to manage and supervise a house construction especially if you have no idea about the material and the specification to be used. So it is better to hire or look for a contractor or someone who will supervise the construction of your house. Here in the Philippines, some contractor is also the one who make the house plan and do the estimates. Choosing a wrong contractor can lead to delays and even legal matters.

The following are some tips on choosing the best contractor:

  1. Make sure that the contractor has licensed to work in your area. The contractor can be an engineer or architect, in this case, make sure that he has license to do the job.
  2. Choose a contractor that specializes in your type of project.  Research your chosen contractor to know if he is specialized in your project.
  3. Make sure that the work and materials to be used in the construction is elaborated clearly before starting the construction. Your contractor should provide the list of materials to be used in the construction as well as complete drawings with written specification.  It includes the cost, the brand to be used, approximate start and finish of dates. Check all items before signing the contract.
  4. Look for the sample work of the contractor. Sample work is more important than the references to see the quality of their work. Look for the contractor’s past project.
  5. Know the person behind the construction of your house. It is important to know the persons who will work for you. Usually, a contractor also subcontracts some jobs such as roofing, trussing, plumbing and electrical works. Make sure that their subcontractors are also trustworthy.
  6. Give rules and guidelines to your contractor before the works begin or even before signing the contract.  The contractor should know your expectations and limitations.

 

How to Apply for the Building Permit

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building permitBuilding permit is the authorization of the government to construct either residential or commercial building.  It is official certificate or document of permission issued by local authorities to a builder to construct, enlarge or change the building. It serves as an authorization of a specific structure at a particular site in accordance with the approved specifications and drawings.

The cost of the building permit is dependent on the location of the lot, size of the lot and the size of the floor plan as well as the total estimate cost.

Building permit is also needed when applying special power connection (SPC) to get temporary electric connection. After the house construction, you can apply for the permanent electric connection and occupancy permit in the municipal hall

Requirement to apply for a building permit here in the Philippines:

  1. House Plan sign by duly authorized person such as Architect, Electrical Engineer, Master Electrician and Civil Engineer
  2. Lot Title
  3. Real Property should be paid
  4. Barangay Construction Permit  to be acquired at your Barangay Hall
  5. Vicinity map (optional) depending on your location
    Just visit municipal hall in your place to acquire building permit and bring the requirements as well as necessary fees.  The zooning inspector will visit and evaluate the site of the house. The processing of building permit takes 5 to 10 days depending on your location.

Sample Construction Contract

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CONSTRUCTION CONTRACT:

I. PROJECT

The Project is a Two Storey  Residential Structure to be finished at Sta. Monica Subd., Makati City with a construction cost of TWO MILLION SEVEN HUNDRED THOUSAND PESOS (php 2, 700,000.00)to be paid by the OWNER (Mr. Amelito and Mrs. Cielo de Guzman), wherein the Construction is under Design-Build of Guaranteed Maximum Cost (UAP Doc. 207, RA. 9266).

II. SCOPE OF WORKS

The ARCHITECT shall exclusively undertake, pursue and manage the completion of the project under Construction of Design-Build of Guaranteed Maximum Cost and shall likewise provide all the necessary materials, labor, tools and equipment necessary for the construction of the said project, and shall perform all such works in accordance with the approved plans and specifications, inclusive of, but not necessarily limited to the items set before this, see Succeeding pages.

The ARCHITECT shall not carry out extra or varied works without the permission and approval of the OWNER and/or his authorized representative. In the same manner any additional construction, revision i.e., not covered by the construction plans and scope of work specified, shall be subject to separate billings by the ARCHITECT.

All additional constructions and amendments to or changes in the plans and specifications from the date hereof and the corresponding costs thereof shall be subjected of a written agreement between the parties; and the amendments or changes shall have the effect of reducing or increasing the contract price hereinbefore stipulated, the same shall be correspondingly adjusted.

construction agreement

III. CONTRACT PERIOD / TIME OF COMPLETION

The work to be performed under this agreement shall commence from and after the receipt by the ARCHITECT of all approved construction permits and licenses required for the project, down payment and upon written approval by the OWNER.

The work shall be completed by the ARCHITECT within ONE HUNDRED TWENTY (150) working days. Provided, however, that any delay of reason of force majeure of fortuitous event, or by reason of additional constructions or amendments to or changes in the construction shall be excluded.

IV. CONTRACT SUM

The OWNER shall pay to the ARCHITECT for the performance of this agreement the sum of TWO MILLION SEVEN HUNDRED THOUSAND PESOS ONLY (php 2, 700,000.00) construction cost.

Upon signing of this agreement,     from and after the receipt, and or the advice of the ARCHITECT, the OWNER undertakes to immediately pay a TWENTY SEVEN PERCENT (27%) down payment to the ARCHITECT in the amount of SEVEN HUNDRED TWENTY THOUSAND PESOS (php 720,000.00), to be utilized as mobility fund, and to cover material and labor expenses for the project. Said payment will be deducted on total project cost. The remaining balance will be paid in progress billing stipulated as follows:
Down Payment………………………….27%     (Php 720,000.00)(Bank Loan)
First Billing after downpayment……..27%           (Php 720,000.00)(Bank Loan)
Second Billing…………………………..27%      (Php 720,000.00)(Bank Loan)
Third Billing…………………………….11%    (Php 300,000.00)
Final Billing…………………………….10%    (Php 240,000.00)(Bank Loan)
________________________________________________________________
Total……………………………………………………(Php 2,700,000.00)

The ARCHITECT shall submit an application for each payment to the OWNER with at least THREE DAYS before each payment for the progress billing falls due. In case of delay of payment sum of due completion time will be adjusted depending on the delay of payment.

V. GUARANTEES

The OWNER and the ARCHITECT agree on the application of the following conditions for the faithful performance of the Contract/Agreement.

The ARCHITECT hereby guarantees that the project shall be constructed strictly in accordance with the scope of works and condition of this contract and shall make good any defect in materials and / or workmanship to the fault of the ARCHITECT/CONTRACTOR within Six Months after the full completion of the project.

VI. TERMINATION OF CONTRACT

The ARCHITECT has the right to terminate the contract or stop work if ordered by any court or other Public Authority, for a period of three months, through no act or fault of the ARCHITECT or anyone employed by him.

The ARCHITECT shall submit written notice or if ordered by any court or other public authority to the OWNER to stop work or terminate this contract/agreement and claim payment for all work executed, profit and damages/loss on the basis of the work completed.

The OWNER shall pay necessary payment to the ARCHITECT; one week after a notice of payment was given to the owner, the ARCHITECT has the right to stop the construction to any failure of payment by the OWNER.

Conforme:

Mr. Amelito and Cielo de Guzman
Owner

Arch. Emerson O. Munoz
Designer.Builder.Consultant

ACKNOWLEDGEMENT

REPUBLIC OF THE PHILIPPINES)
CITY OF BALANGA                      )S.S.

BEFORE ME, a Notary Public for and in Balanga City, Bataan, on this_________________personally came and appeared:

CTC NO.                     DATE/PLACE ISSUED

ARCH. Emerson O. Munoz        __________________________       ____________________________
MR. Amelito de Guzman            __________________________       ____________________________

Known to me and to me known to be the same persons who executed the foregoing instrument and acknowledged to me that the same are their own free act and deed.

WITNESS MY HAND NOTARIAL SEAL, on the date and place above written.

Doc. No.¬¬______
Page No.______
Book No.______
Series of 2013

Planning to Construct a House

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two-storey houseWe dream to have our own house but we did not know how to start and what are the steps and procedures to do.  Of course, you have to own a lot before construction a house. Finalized your budget and knows what designs and what type of house do you like whether a bungalow type or two-storey house. Are you planning to avail loan either from bank, lending institution or Pag-ibig?

If you know the type of house as well as the floor plan you want, you can talk to the architect or draftsman to draw your house and do the perspective of your house.

Steps:

1.    Secure a house plan to be used by your supplier and contractor in order to construct your house.

2.    Go to your municipal office to apply for building permit.  Building permit is one of the requirement for the building a house. This document is a formal approval by the government as meeting the prescribed codes. It serves as an authorization to proceed with the construction of a specific structure at a particular site in accordance to approved drawings and specifications.

3.    Look for the contractor or skilled workers who will make your house.  Make sure that you will pick the best contractor with low cost estimate but quality work.  If you do not have a contractor, you can hired skilled worker such as mason and carpenter to do you house. Also, hire a person who will supervise your house and this person should be knowledgeable in civil works.

4.    Before signing a contractor agreement, make sure that the materials and labor specification are elaborated clearly. You can consult the contractor agreement to the person who is knowledge in term of civil works.

5.    Make sure to visit your house very often to see if the contractor follows the house plan as well as the materials and specification in the contractor’s agreement. If you have extra budget, you can hire consultant for your house.

House Plan Components

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If you finalized your budget and have a lot already, you can now hire an architect or either a draftsman who will draw your dream house.  You should have an idea how big your house should be as well as your desire design. You probably want a two-storey house or bungalow type. In this case, your architect will create a house which provides the plans and specification of your house.  House plan is a set of construction or working drawings that describe all the construction specifications of a house such as dimensions, layouts, materials, installation methods and techniques.

house plan sample

House plan is one of the requirements in order to construct a house. It is submitted to acquire a building permit.   These will also use by the suppliers and subcontractors to tell what materials will be used in your house as well as how your house look like.

The following are components of house plan

•    Foundation Plan

It contains the plan indicating the general design intent of the foundation including dimensions, concrete walls, footings, pads, posts, beams, bearing walls, and extent of structural slabs.

•    Floor Plan

It includes the dimension plans such as room layout, walls, doors and windows. Exterior and interior wall framing are also included. The room sizes and any beams, posts and structural bearing points are indicated. Also, it contains the electrical legend, electrical fittings, lights, outlets as well as the cross-section details and any special framing details application to the design.

•    Exterior Elevation

It indicate the materials for the walls, roof and other elements that part of the room. Also, it includes the floor and ceiling heights, dimensions of standard windows and roof overhangs, location of flashing, height and location of foundation, type of finishing and textures.

•    Roof Plan

It indicated the types of roofs to be used.  It illustrates ridges, valleys, and hips as well as the roofing materials, slopes of roof surfaces, chimneys and decorative elements.

•    Electrical Plan

It provides the drawings of electrical plan that indicates the location of the lighting fixtures, switches and outlets, lighting design and layouts.

•    Building Section and truss details

It shows the changes in floor, ceiling, roof height and the relationship of one level to another.  It shows the relationship the ground to the house and the roof.

•    Construction Notes and Details

It provides the foundation, interior walls, exterior walls, floors, stairways and roof details. It also includes the certain type of walls, concrete porch and connection with wood frames and among others.

Here in the Philippines, the cost of house plan is more of less Php15,000.00 for bungalow type and more or less Php25,000.00 for two-storey house.

How to Avail Pag-ibig Housing Loan

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pag-ibig loanMost Filipinos are homeless and just renting an apartment. They have no enough money to construct their own house. Some of them are trying to get help either from Bank or Pag-ibig to finance their house. One of the benefits of employees is to availing housing loan on Pag-ibig.

Pag-ibig Housing Loan Application Steps:

  1. Attend seminar about the housing loan application and they give you a checklist
  2. Prepare all the documents needed in 3 set of copies and compile them in folder.
  3. Fill out all details correctly and honestly.
  4. Wait for the Notice of Approval if your loan was approved.
  5. They will contact you in case there are additional documents required.

Here are the following requirements to avail Pag-ibig Housing Loan:

  • You should be a Pag-ibig active member and have a contributed of at least 24 months of contribution which is equivalent to 2 years contribution. If you are no longer active member, just resume being active and you can apply. If you are a new member, pay lump sum payment to complete the 24 months contribution and submit the Pag-ibig Fund Receipt (PFR) upon filing of housing loan application.
  • You should attend a seminar about your housing loan application. The seminar will discuss all the processing steps and tackled all requirements and points about the loan application.
  • You have to submit 3 sets of the following requirements
    o    Housing loan application with recent 1×1 photo
    o    Membership Status Verification Slip with 2 valid ID photocopy
    o    Proof of income documents

For Locally Employed, any of the following:

  1. Notarized Certificate of Employment and Compensation (Employer’s Format) and for government employees 1 month payslip, within 3 months prior to the date of loan application
  2. Latest ITR for the year immediately preceding the date of loan application – attach W2 form, stamped received by the BIR/Certificate of Tax Withheld (BIR Form 2316)

For Self-employed / Other Sources of Income, any of the following:

  1. ITR, Audited Financial Statements and Official Receipt of Tax Payment from bank supported with DTI Registration and Mayor’s Permit/Business Permit
  2. Commission Vouchers reflecting the issuer’s name and contact details (for the last 12 months)
  3. Bank Statements or passbook for the last 12 months (in case income is sourced or derived from foreign remittances, pensions, etc.)
  4. Copy of Lease of Contract and Tax Declaration (if income is derived from rental payments)
  5. Certified True Copy of Transport Franchise issued by appropriate government agency (LGU for tricycles, LTFRB for other Public Utility Vehicle (PUVs)
  6. Certificate of engagement issued by owner of business
  7. Other document that would validate source of income or funds

For OFWs, any of the following:

  1. Employment Contract (with English translation if in foreign language)
  2. Original Employer’s Certificate of Income (with English translation if in foreign language). If document submitted is photocopy, it shall be duly certified/initiated by Pagibig Fund Information Officer assigned in the country where the member works.
  3. Other Proofs of Income, whether original or photocopy, shall be duly certified/initiated by Pagibig Fund information officer assigned in the country where the member works.
  • You should also have a photocopy (back-to-back) of 1 primary valid ID of Principal Borrower and Spouse, Co-borrower and Spouse, Seller and Spouse and Developer’s authorized representative and Attorney-in-Fact, if applicable
  • Submit Authorization to conduct credit/background investigation
  • A Special Power of Attorney is needed for OFW’s notarized prior to date of departure or duly certified and authenticated by the Philippine Embassy or Consulate in the country where the member is staying, if abroad.  If SPA is without the Red Ribbon of Consulate Office, the SPA must duly stamped notarial seal.
  • Health Insurance Coverage
    o    Health Statement Form (Medical Questionnaire)
        OFW members over 60 years old
        Loans over 2M pesos to 6M pesos and for borrowers aged up to 60 years old
    o    Health Statement Form (Medical Questionnaire and Full Medical Examination
        Borrowers over 60 years old
  • Marriage Contract for all married borrower, co-borrower/s, spouse, family member/s included on the computation of aggregate income.
  • Birth certificate of or any proof of relationship, if with co-borrower/s or family member/s included on the computation of aggregate income.
  • Certified True Copy of Transfer Certificate of Title (TCT) – from Registry of Deeds
  • Photocopy of Updated Tax Declaration and Updated Real Estate Tax Receipt  from Municipal’s Assessor’s Office.
  • Submit Location Plan and Vicinity Map
  • Approved letter request to re-avail of a Pag-ibig housing loan for members with housing loan that was foreclosed, cancelled, bought back due to default or subjected to dacion en pago

Additional Requirements

  • Building plans, specification and bill of materials signed by the Licensed Civil Engineer or Architect and building permit for construction of house and house improvement
  • Statement of Account on Outstanding Loan Balance indicating loan purpose for refinancing. Also, submit any of the two; official receipt for the past 12 months subsidiary ledger or any valid proof of payment for the past 12 months.
  • Contract to Sell or similar agreement between the buyer and seller for the Purchase of Lot or Adjoining Lots and Purchase of Residential Unit, Townhouse or Condominium Unit inclusive of a parking slot. If the seller is a developer, submit the certificate of registration, license to sell, development permit, and secretary’s certification as well as photocopy (back to back) valid primary ID from Corporate Secretary
  • Building plans, specification and bill of materials signed by the licensed civil engineer or architect and building permit for the purchase of lot and construction of house. Also, you have to submit contract to sell, or similar agreement between the buyer and seller. If the seller is a Developer, submit certificate of registration, license to sell, development permit and secretary’s certificate and photocopy (back to back) valid primary ID from corporate secretary