One quick phone should do this. You simply go to your banker and because of your great relationship, she will set you up with the building loan you need to build your home. Where is this “easy button” now?
Okay, maybe you don’t think it will be that simple, but it certainly can’t be so disturbing, right? A construction loan is a unique animal. Few lenders have experience in this and many lenders don’t even touch it. In order for the lender to control it and make a profit, it takes some real experience and good management.
What is a construction loan?
A house construction loan finances your house construction project. It is perceived by the lender as a risky proposal. They are asked to finance the promise. All loans are a promise to pay, yes, but a construction loan is a promise to pay without much collateral. There is no house that could be taken over if it is not completed. Not all banks are willing to participate in this project.
These loans can be profitable for lenders, but they need to reduce their risks as much as possible before they get involved. It is precisely this reduction in risk that makes them seem so choosy in terms of qualification standards.
This is what you should ask the lender before you start ploughing up your house plans. Their answers will help you to understand their requirements.
Will they accept you as a Building Owner or will they require a licensed contractor?
Make sure that your banker knows what your goal is. Are you a real builder of the owner? Will you hire a general contractor? What is their policy on owner involvement?
Does your bank check the contractors for approval?
Many banks and other lenders will have the last word about the builder or general contractor you use. Others that allow Owner Builder programs will probably require a Home Building Coach trainer. How do I approve them?
What kind of equity capital does a bank require of you to have it first?
Does your land need to be free and free of all credits and charges? Will you have to put additional cash into the project?
Do they use the “building control” system to pay bills?
How is the money spent on the whole house building project? Will you be responsible for the money you pay out? What will be the paperwork? How much will it cost the administration?
Will you be obliged to repay the building loan?
If you do not repay your construction loan along the way, how much interest reserve will you need to include in the loan?
How many months does a construction loan last?
Construction loans for housing are usually very short-term loans. They have a loan term of 6 to 12 months on average. What is their policy if you finally need more time?
Will the loan be automatically converted into a 30-year mortgage loan?
From this you can see that it is important to start this conversation early. There are many rings through which you can go and it is a continuous process. You may not be able to act exactly as you imagined.
Finally, getting credit for the construction of your dreams is only part of the reality in which it takes place. My advice is to go with the current and provide the banker with what he needs. She also wants to do it! Just make sure you communicate well with the banker. Ask questions and you understand the reasons for this. It will make your life easier. Even if you work without this phantom “button”.
You can learn so much more about building and reconstructing your home online. Find here Bush Builders House Extensions, you will also find other tips and tools for home renovations.