How to Know if You are Eligible for a Construction Loan
For a home to look impressive, many people normally renovate or flip their homes. 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. 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. Many people usually seek these constructions loans, but they are denied it because of their ineligibility. The lenders will only give credit to the eligible persons. 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. Although lender may offer the money for different projects, they can never risk lending money when there is no licensed builder. The builder has to be profitable and prove this. These records should be presented to this company before a loan is issued. Therefore, it is crucial that you get a licensed and professional builder so as to qualify for a loan.
Before looking for a construction loan you need to compile details of the building. 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. This will put you in a fix especially if you don’t have building experience. You should seek more details online on these requirements. However, a professional builder will also advise you about this.
Your home also has to be evaluated and valued before seeking the 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. The lender will need one copy of the book. The appraisers also use the blue book to calculate the value of your project.
A down payment is another thing that you need to have prior to getting a loan. 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. You also need to show them that you are able to pay back the loan. You may, therefore, be asked to prove this by providing your credit report. Copies of your current paychecks may be required, and finally, you will be handed over the money.
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