Many homeowners today are using a second mortgage to remodel their homes. Once they have the design and the cash, they need to take the next step: finding a contractor who they can trust. Here are three tips for choosing the right professional for the job.

There's some upside to the dismal housing market. First, since the Federal Reserve has been aggressively cutting rates, second mortgages, the financial tool commonly used for financing a renovation, are available at historically low interest rates. Second, it's easier to find a contractor who will use that home equity loan to remodel your home. However, unless you know something about construction, you may have no idea which contractor to choose. Below is a list of tips to help you choose the right contractor who can transform your ordinary dwelling into your dream house.

Tip 1: Ask and ye shall be referred

The best way to begin is by asking friends for referrals. If all they can offer is the number of their cousin's sister's boyfriend's neighbor, politely decline. Contact friends who have recently remodeled. Ask about their experiences. Did the contractor do a good job? Was he responsive to their questions during the job and after the work was complete? Did he stick to the budget and time frame? Most people will gladly talk about their experiences, especially if they weren't good ones.

Tip 2: The more the merrier

When making a selection for a contractor, get more than one estimate, and compare and contrast bids. It's about more than just price. Consider how quickly the contractor returned your call and visited your home. Did you like him? Make sure that the person who you're entrusting your hard earned dollars and your home to is someone who you feel good about. He'll be around your home, your possessions, and your family for quite some time.

Tip 3: Choose Wisely

Once you've selected a contractor, don't feel like you're locked in. Make sure that you're comfortable speaking with him, and that he understands your goals and budget. Read the contract carefully, to ensure that it reflects your needs. If there's something that you don't understand, ask. Some basic things should be in the contract, including start and end dates, a payment schedule, and the scope of the project. Review the contract for paragraphs on insurance, warranties, and dispute resolution. There should be an explanation of the Federal Trade Commission's three-day rule, which allows you to back out of the contract. The contractor should purchase all of the permits needed for construction, and that should be in writing, as well.

It's great that you have a second mortgage today in order to make the changes you need on your home tomorrow. When investing lots of time, money, and energy, choosing the right contractor has to be based on an informed decision.