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Determining Your Eligibility for a Construction Loan

For a home to look impressive, many people normally renovate or flip their homes. However, this can cost you a lot of money, and many people find it a big challenge. Good news is that there are many lenders who can loan you the money. The money for building or renovating your house will be given as construction loan. First of all, you need to know if you can qualify for the loan. Many people usually seek these constructions loans, but they are denied it because of their ineligibility. The lenders will only give credit to the eligible persons. 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 cannot get the loan here if you don’t have this contract. The reason behind this is that the lender cannot risk their money. The builder has to be profitable and prove this. 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.

Before looking for a construction loan you need to compile details of the building. Other than only hiring a licensed contractor, you have to provide particular details regarding your project. These details include floor plans, even cost projections, and materials inventories. If you don’t give these details, they will assume that you are hiding something and reject your application. This will put you in a fix especially if you don’t have building experience. It is good to get more info. on this from the lender’s website page. You can also consult the building expert.

It is also necessary that you have your home appraised before looking for a construction loan. The lender will depend on this valuation to know how much to lend to you. If you are building a new home, you need to hire an appraiser to do the valuation for you. The home builder should have compiled the blue book already. Before processing the loan, the creditor will need this book. It will also be helpful to the appraiser.

Before looking for a construction loan, you also need to have saved for the down payment. The down payment will be paid to the creditor before the loan is disbursed. This is a sign of commitment to the agreement since some borrowers may abandon the project midway and leave them with losses. You also need to show them that you are able to pay back the loan. This can be done with a credit report. Copies of your current paychecks may be required, and finally, you will be handed over the money.