A How-to Guide for Determining Whether You Can Qualify for a Construction Loan
When it comes to building or renovating homes, many people love it. However, this can cost you a lot of money, and many people find it a big challenge. The great news is that you can always obtain money from lenders. The money for building or renovating your house will be given as construction loan. First of all, you need to know if you can qualify for the loan. A few people are normally disqualified if they don’t meet the specifications. You have to meet the lender’s criteria before getting a loan. Read more below on determining your eligibility for a construction loan.
When looking for a construction loan, the first question you need to ask yourself is whether you have contracted a licensed builder. You cannot get the loan here if you don’t have this contract. Although lender may offer the money for different projects, they can never risk lending money when there is no licensed builder. The builder has to be profitable and prove this. The lender has to see these details before issuing the construction loan. hence, you should have this documentation when going to look for a loan.
Another important thing you need to do is to compile the building details. The finance company needs details of your building apart from the ones of the licensed builder. These details include floor plans, even cost projections, and materials inventories. Failure to provide this, your loan will not be approved. This will put you in a fix especially if you don’t have building experience. You should seek more details online on these requirements. You can also consult the building expert.
It is also necessary that you have your home appraised before looking for a construction loan. This will help the lender to know how much to lend to you depending on the value of your home. If you are building a new home, you need to hire an appraiser to do the valuation for you. The home builder should have compiled the blue book already. The lender will need one copy of the book. The book can also be used for valuing the home.
Before looking for a construction loan, you also need to have saved for the down payment. Even when your loan is approved, most lenders will demand a down payment before disbursing the loan. This is a sign of commitment to the agreement since some borrowers may abandon the project midway and leave them with losses. Also, you need to prove your ability to repay the loan. A credit report can be used to prove this. Latest paycheck copies may also be necessary to prove this.