Determining Your Eligibility for a Construction Loan
For a home to look impressive, many people normally renovate or flip their homes. Nevertheless, many of them usually lack money to undertake these projects. Good news is that there are many lenders who can loan you the money. Construction loans are usually given for building or renovating your house. 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. Lending companies will only give you a loan if you meet their requirements. Read more below on determining your eligibility for a construction loan.
Before searching for a construction loan, you should have a licensed builder. 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. In addition to this, the builder should have a profitability and solid building record. This proof should be tabled before the lender. hence, you should have this documentation when going to look 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. If you don’t give these details, they will assume that you are hiding something and reject your application. This will ruin your plans. You should seek more details online on these requirements. However, a professional builder will also advise you about this.
It is also necessary that you have your home appraised before looking for a construction loan. The lender will depend on this valuation to know how much to lend 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. The lender will need one copy of the book. It will also be helpful to the appraiser.
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. A lender asks for a down payment to prevent losses from people who abandon the project midway. You also need to show them that you are able to pay back the loan. A credit report can be used to prove this. Latest paycheck copies may also be necessary to prove this.