How to Get a Home Construction Loan
Once you’ve made the decision to take out a home construction loan, you need to know how to get it.
Here is a step-by-step guide to help you get a home construction loan.
- Select a Home Builder
Your choice of a home builder will determine your home’s value. A home is a major investment that most people make during their lifetime. Therefore, choose your home builder carefully.
Here are tips to help you choose the right home builder:
- Shop around
- List down potential builders
- Conduct extensive research on builders
- Look for quality balance and value
Once you’ve chosen a home builder, move on to the next step.
- Choose a Lender
Credit unions and banks offer home construction loans. There are online lenders specializing in mortgages. Low-profit margin makes some banks shy away from giving construction loans. However, there are lenders that do not hesitate to jump in.
If your construction loan application is turned down by your bank, consider options like crowdfunding and peer to peer lending. When choosing a lender, talk to your builder about it. Some lenders have established relationships with some lenders and they can help you in securing a loan.
- Prepare Credit
Get everything in order and prepare your credit before applying for your construction loan. This will enable you to maximize credit score. Remember that applying for different credit lines within a short time will act as red flags trigger. Therefore, be focused on your preferred construction loan.
- Get Pre-Approval
A pre-approval enables you to determine the amount you may borrow and design the new construction as per your budget. Note that pre-approval may differ. It can also take between 30 and 90 days. Most lenders consider the FICO credit score, income-to-debt-ratio, and equity.
Apply for the Home Construction Loan
When applying for the loan, have the following ready:
- Contract for lot purchase or the offer to buy a lot.
- Approved house plans
- Break down of the cost from the builder
- Banking and credit references, builder resume, and insurance certificates
- Construction project schedule
- Insurance proof
- Down payment details
- Complete loan application form
Send your home construction loan application and wait for the approval with these ready.