How to Know if You are Eligible for a Construction Loan

When it comes to building or renovating homes, many people love it. However, in most cases only one thing will stand in your way, and that is money. 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. Before seeking for this construction loan, it is important that you ask yourself if you qualify for this service. If you are not eligible, you may not get the loan. 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.

When looking for a construction loan, the first question you need to ask yourself is whether you have contracted a licensed builder. You will not be given any loan if there is no contract with a licensed builder. The reason behind this is that the lender cannot risk their money. There should also be a profitability record from the builder. The lender has to see these details before issuing the construction loan. Therefore, it is crucial that you get a licensed and professional builder so as to qualify for a loan.

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. These are inventories of building materials, plans of the floor and even cost projections. 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. An expert builder will also come in handy.

It is also necessary that you have your home appraised before looking for a construction 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. Make sure that your builder has compiled your home’s specifications in a Blue Book. One of copy of the blue book should be handed over to the lender for easy processing. The book can also be used for valuing the home.

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. This will act as a commitment and also to avoid losses to the lender. Again, you will need to show that you can repay the loan. A credit report can be used to prove this. Copies of your current paychecks may be required, and finally, you will be handed over the money.