Determining Your Eligibility 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. 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. Before seeking for this construction loan, it is important that you ask yourself if you qualify for this service. Many people usually seek these constructions loans, but they are denied it because of their ineligibility. 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 cannot get the loan here if you don’t have this contract. The reason behind this is that the lender cannot risk their money. There should also be a profitability record from the builder. 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.
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. If you are new in this, you should read more about this online. 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. The lender will depend on this valuation to know how much to lend to you. In this case, an appraiser is needed to come and do a valuation for your home. You need a blue book compiled for your home. Before processing the loan, the creditor will need this book. It will also be helpful to the appraiser.
Before looking for a construction loan, you also need to have saved for the down payment. Even when your loan is approved, most lenders will demand a down payment before disbursing the loan. A lender asks for a down payment to prevent losses from people who abandon the project midway. 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. You may also need to provide your paycheck copies.