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. However, you can obtain a loan from the many lenders available. The money for building or renovating your house will be given as construction loan. 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. Although lender may offer the money for different projects, they can never risk lending money when there is no licensed builder. There should also be a profitability record from the builder. These records should be presented to this company before a loan is issued. hence, you should have this documentation when going to look for a loan.
Before looking for a construction loan you need to compile details of the building. 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. Failure to provide this, your loan will not be approved. Lack of money can challenge you especially if you are new to building. If you are new in this, you should more about this online. You can also consult the building expert.
Prior to looking for the loan, your home needs to be valued. 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. Make sure that your builder has compiled your home’s specifications in a Blue Book. The lender will need one copy of the book. The appraisers also use the blue book to calculate the value of your project.
Before looking for a construction loan, you also need to have saved for the down payment. This should be paid to the lender before you get the loan. This is a sign of commitment to the agreement since some borrowers may abandon the project midway and leave them with losses. Also, you need to prove your ability to 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.