Before signing a contract for a construction loan, it’s important that you understand how they work to ensure that you know the ins and outs of the process.
When you are going to be building a new home, it’s important that you secure a construction loan to have the money you need. While this may seem easy, it’s important that you understand the construction loan process and requirements before you get started so that you are prepared for what is to come. While every company has different construction loan requirements, to get a loan, you will have to meet their qualifications. Just like obtaining a mortgage, construction loan qualification will include showing your income and debit information to the lender to prove that you can pay back the money you borrow.
Because your builder will need to be paid in order to buy materials and pay contractors, your loan will be given in a series of “draws.” This construction loan draw schedule allows them to get the money that they need during construction, so they are able to continue with construction. In order to obtain the draws, there are usually inspections to ensure that the building process is moving along smoothly and the way that it should. At the end of the build, there is a final inspection that confirms that construction is complete and that the home is suitable for a person to live in.
When looking for financing, you have to make sure that you have enough for a construction loan down payment, or you will find it very difficult to get the money that you need. After proving that you are qualified for the loan, you will have to find a builder who is going to be able to build your new home in the time frame set by the lender. Depending on what kind of construction loan you have chosen, the home construction loan process will vary a little. While one type of loan will convert to a regular mortgage at the end of construction, the other will require you to obtain a mortgage before moving into your home and after construction is complete.
While the home construction loan process may seem overwhelming, we are here to help you through the process and make it as easy and stress-free as possible. No matter where you are in the planning process, if you are considering a construction loan or have questions about construction loans and how they work, we are here to help.
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