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. However, you can obtain a loan from the many lenders available. Construction loans are usually given for building or renovating your house. However, you need to assess whether you are eligible for the loan first. If you are not eligible, you may not get the loan. Lending companies will only give you a loan if you meet their requirements. Read more below on determining your eligibility for a construction loan.
You need to contract a licensed builder before looking for this loan. You cannot get the loan here if you don’t have this contract. The reason behind this is that the lender cannot risk their money. The builder has to be profitable and prove this. This proof should be tabled before the lender. Therefore, it is crucial that you get a licensed and professional builder so as to qualify for a loan.
It is vital that you also compile details of the building beforehand. Apart from getting a licensed builder, the lender needs some details about the house. They have to see detailed floor plans, even cost projections and comprehensive materials inventories. Failure to provide this, your loan will not be approved. This will ruin your plans. If you are new in this, you should read more about this online. You can also consult the building expert.
It is also necessary that you have your home appraised before looking for a construction loan. The value of the home will determine how much is lent to you. 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. One of copy of the blue book should be handed over to the lender for easy processing. The book can also be used for valuing the home.
Prior to getting this loan, you need to have a down payment ready. Even when your loan is approved, most lenders will demand a down payment before disbursing the loan. This will act as a commitment and also to avoid losses to the lender. You also need to show them that you are able to pay back the loan. You may, therefore, be asked to prove this by providing your credit report. You may also need to provide your paycheck copies.