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. However, you need to assess whether you are eligible for the loan first. A few people are normally disqualified if they don’t meet the specifications. The lenders will only give credit to the eligible persons. The following is a how-to guide for determining whether you can qualify for a construction loan.
You need to contract a licensed builder before looking for this loan. If you haven’t done this, then you should just forget about obtaining the loan now. 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. Before getting a loan, make sure that you have a licensed builder to get an approval.
It is vital that you also compile details of the building beforehand. 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. 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. If you are new in this, you should read more about this online. An expert builder will also come in handy.
Your home also has to be evaluated and valued before seeking the loan. 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. 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. The down payment will be paid to the creditor before the loan is disbursed. 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. You may also need to provide your paycheck copies.