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. However, you can obtain a loan from the many lenders available. Construction loans are usually given for building or renovating your house. Before seeking for this construction loan, it is important that you ask yourself if you qualify for this service. A few people are normally disqualified if they don’t meet the specifications. 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.
You need to contract a licensed builder before looking for this loan. 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. There should also be a profitability record from the builder. These records should be presented to this company before a loan is issued. hence, you should have this documentation when going to look 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 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. 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. 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.
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. This will act as a commitment and also to avoid losses to the lender. You also need to show them that you are able to pay back the loan. A credit report can be used to prove this. Latest paycheck copies may also be necessary to prove this.