How to Know if You are Eligible for a Construction Loan
Many people love building, renovating or flipping their homes. Nevertheless, many of them usually lack money to undertake these projects. 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. 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. 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. The finance company needs details of your building apart from the ones of the licensed builder. 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.
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. It is also advisable to look for an appraiser to value your home. Make sure that your builder has compiled your home’s specifications in a Blue Book. Before processing the loan, the creditor will need this book. 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. 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. A credit report can be used to prove this. You may also need to provide your paycheck copies.
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