Texas law is very unique when it comes to fully documenting a loan for a residential construction project. If the documents are not done properly, a lender will lose the ability to foreclose and take over a doomed project. Following the Texas formula is imperative; no shortcuts are effective. In essence, and in addition to the construction contract, an owner and contractor must execute a “Mechanic’s Lien Note and Contract”, which are in fact financial documents as opposed to construction contracts. The contractor then assigns the Mechanic’s Lien documents to the lender, who renews and extends the terms of the Mechanic’s Lien documents into their own Promissory Note and Deed of Trust. Complicated? Yes. Important? Double Yes.
Documents to be prepared for you: “Follow-Through” Instructions, Mechanic’s Lien Note, Mechanic’s Lien Contract, Note Endorsement, Assignment of Contract, Construction Note, Construction Deed of Trust.