You probably have a lot of questions if you are considering a construction loan. Get the answers you need here to put your mind at ease.
Preparing to build a new home is exciting but can be very stressful. Get all the answers that you need about how a construction loan works here.
The best way to start the process of obtaining a construction loan, to build a new home or renovate your current house, is to work with a company that specialises in this type of work. After deciding who you are going to work with and what kind of construction loan you need, be ready to bring all of your documents to show that you are financially able to repay the loan. At Donkey Finance, we can answer all of your questions and simplify the process for you to make it as seamless as possible.
The process to get a construction loan usually takes between one and two months, depending on how busy the loan officer is, how prepared you are with documents, and how quickly the company you hire to provide you with a loan is able to close. While some construction loans can be completed and closed in under a month, the normal time is a lot longer due to delays and the importance of having the right information for the loan.
Financing your home renovation is easy when you opt for a construction loan. While most development loans are used for a new build, you can use a construction loan to finance renovation work as well, but you have to be prepared. Make sure that you know exactly how much money you need and how long the work will take, and that you already have someone ready to start the renovations as soon as you have the approval. The building company will then take draws on the money, just like when building a new home, to pay for materials and labour.
Having the right information will make getting a construction loan a lot easier. You will need a comprehensive plan of the build as well as a layout of the construction for the lender. Depending on what type of financing you choose, you may need to pay a down payment. Appraisals during the build are necessary, and you will have to meet all the eligibility criteria, including credit, ability to repay, employment, and other factors.
The credit score that you will need to obtain a construction loan will vary depending on how much money you are going to borrow. The higher the amount of the loan, the higher your credit score needs to be. It is not uncommon for lenders to look for scores of 680 or higher.
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