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. The great news is that you can always obtain money from lenders. The money for building or renovating your house will be given as construction loan. 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. The following is a how-to guide for determining whether you can qualify for a construction loan.
You need to contract a licensed builder before looking for this loan. 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. There should also be a profitability record from the builder. 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.
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. 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 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. This will help the lender to know how much to lend to you depending on the value of your home. In this case, an appraiser is needed to come and do a valuation for your home. The home builder should have compiled the blue book already. Before processing the loan, the creditor will need this book. The appraisers also use the blue book to calculate the value of your project.
Prior to getting this loan, you need to have a down payment ready. This should be paid to the lender before you get the loan. 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. You may, therefore, be asked to prove this by providing your credit report. You may also need to provide your paycheck copies.