Construction Loan...Where do you start?A new construction loan is a short-term loan used to pay for the building expenses of a home typically with the option of turning it into a mortgage once the home is completed. The loan process can be stressful and confusing but if you follow some basic guidelines the process should be painless. I believe the best first step is to have as much of your project details in place as possible when you first meet with a potential lender. Details like plan design, site selection, and hopefully projected project costs will be of great value early in this process and will be required before the process can proceed. Let them see the house plans when you get them. Also, talk to a builder and let them know where you stand with the loan process. Working together with the lender and builder can make things much easier Select a lender that you feel comfortable with and who is open and helpful to all of your questions. Working with a lender who is hard to talk to or reach will end up as an unpleasant experience. They should be happy to answer any questions you have and easily explain things to you. Get pre-qualified so you know how much you can spend and for what amount you need to make the construction loan. Find out the approximate monthly payments on the loan. Fill out a loan application and bring your tax and financial information as well as information mentioned above to your lender. Choose a loan that is right for you and your situation. New construction loans are different from mortgages and should be handled differently. Normally, you pay only the interest while the home is being built and the principal is due upon completion of the home. This is when you can turn the loan into a mortgage with better rates. Make sure the lender lets you know all of the available options in your situation.
You will want to discuss topics like, when will pay-outs be made and what documentation or paperwork they will need to pay an expense. Will they require lien waivers or another form to confirm clear payment on all moneys owed for your project? You don’t want to get in a situation where you have paid for goods or service and someone places a lien against the property over a payment dispute. A lien becomes a claim against your property and will hold up finalization of your mortgage loan. What turnaround time can you tell your contractors and suppliers to expect for payment once they submit an invoice?
Return from Construction Loan to Construction Document
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Do you want to learn How to Build a House? Maybe you are interested in learning about PEX Plumbing? How about understanding the Cost to Build a House? For these questions and many more visit Home Building Questions today.
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