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. First of all, you need to know if you can qualify for the loan. Many people usually seek these constructions loans, but they are denied it because of their ineligibility. 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. The reason behind this is that the lender cannot risk their money. The builder has to be profitable and prove this. The lender has to see these details before issuing the construction loan. 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. Other than only hiring a licensed contractor, you have to provide particular details regarding your project. These are inventories of building materials, plans of the floor and even cost projections. Your loan will not go through if you don’t do this. This will ruin your plans. You should seek more details online on these requirements. You can also consult the building expert.
Prior to looking for the loan, your home needs to be valued. The value of the home will determine how much is lent to you. It is also advisable to look for an appraiser to value your home. 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. Again, you will need to show that you can repay the loan. A credit report can be used to prove this. Copies of your current paychecks may be required, and finally, you will be handed over the money.