Determining Your Eligibility for a Construction Loan
When it comes to building or renovating homes, many people love it. Nevertheless, many of them usually lack money to undertake these projects. 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. 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. Read more below on determining your eligibility for a construction loan.
Before searching for a construction loan, you should have a licensed builder. You cannot get the loan here if you don’t have this contract. 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. This proof should be tabled before the lender. 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. These details include floor plans, even cost projections, and materials inventories. Failure to provide this, your loan will not be approved. 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. If you are building a new home, you need to hire an appraiser to do the valuation for you. 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. It will also be helpful to the appraiser.
Prior to getting this loan, you need to have a down payment ready. Even when your loan is approved, most lenders will demand a down payment before disbursing the loan. 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. This can be done with a credit report. You may also need to provide your paycheck copies.