A How-to Guide for Determining Whether You Can Qualify for a Construction Loan
Many people love building, renovating or flipping their homes. Nevertheless, many of them usually lack money to undertake these projects. However, you can obtain a loan from the many lenders available. This can be taken in the form of a construction loan so that you can build your home. Before seeking for this construction loan, it is important that you ask yourself if you qualify for this service. If you are not eligible, you may not get the loan. Lending companies will only give you a loan if you meet their requirements. The following is a how-to guide for determining whether you can qualify 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. If you haven’t done this, then you should just forget about obtaining the loan now. The reason behind this is that the lender cannot risk their money. There should also be a profitability record from the builder. These records should be presented to this company before a loan is issued. Therefore, it is crucial that you get a licensed and professional builder so as to qualify 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 are inventories of building materials, plans of the floor and even cost projections. 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. An expert builder will also come in handy.
Your home also has to be evaluated and valued before seeking the 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. Make sure that your builder has compiled your home’s specifications in a Blue Book. Before processing the loan, the creditor will need this book. The appraisers also use the blue book to calculate the value of your project.
A down payment is another thing that you need to have prior to getting a loan. The down payment will be paid to the creditor before the loan is disbursed. This is a sign of commitment to the agreement since some borrowers may abandon the project midway and leave them with losses. Again, you will need to show that you can repay the loan. This can be done with a credit report. You may also need to provide your paycheck copies.