How to Know if You are Eligible for a Construction Loan
Many people love building, renovating or flipping their homes. 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. 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. A few people are normally disqualified if they don’t meet the specifications. You have to meet the lender’s criteria before getting a loan. Read more below on determining your eligibility 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. When there is no licensed builder, the creditor will not be willing to lend you the money. There should also be a profitability record from the builder. The lender has to see these details before issuing the construction loan. Before getting a loan, make sure that you have a licensed builder to get an approval.
Another important thing you need to do is to compile the building details. Apart from getting a licensed builder, the lender needs some details about the house. These are inventories of building materials, plans of the floor and even cost projections. If you don’t give these details, they will assume that you are hiding something and reject your application. Lack of money can challenge you especially if you are new to building. 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. 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. 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.
A down payment is another thing that you need to have prior to getting a loan. The down payment will be paid to the creditor before the loan is disbursed. This is a sign of commitment to the agreement since some borrowers may abandon the project midway and leave them with losses. You also need to show them that you are able to pay back the loan. A credit report can be used to prove this. You may also need to provide your paycheck copies.