Determining Your Eligibility for a Construction Loan
When it comes to building or renovating homes, many people love it. However, in most cases only one thing will stand in your way, and that is money. 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. 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. The following is a how-to guide for determining whether you can qualify for a construction loan.
Before searching for a construction loan, you should have a licensed builder. You will not be given any loan if there is no contract with a licensed builder. 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. 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. Other than only hiring a licensed contractor, you have to provide particular details regarding your project. These details include floor plans, even cost projections, and materials inventories. If you don’t give these details, they will assume that you are hiding something and reject your application. This will put you in a fix especially if you don’t have building experience. 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 lender will depend on this valuation to know how much to lend 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. Before processing the loan, the creditor will need this book. The book can also be used for valuing the home.
Prior to getting this loan, you need to have a down payment ready. The down payment will be paid to the creditor before the loan is disbursed. A lender asks for a down payment to prevent losses from people who abandon the project midway. Also, you need to prove your ability to repay the loan. This can be done with a credit report. Latest paycheck copies may also be necessary to prove this.