Unless you plan to pay cash for your home building project, you will need to obtain financing for construction and a mortgage for the balance due when finished. While you may have qualified for a mortgage loan before getting a construction loan for your home building project can be a little challenging.
Although it is certainly possible to get a construction loan as owner-builder, lenders may shy away from you at first, thinking that you are not qualified to handle such an undertaking. Therefore, it is very important to be prepared and demonstrated in a light capable, competent in presenting its case to the lender. For example, do not say, "I've never really done this before, but am willing to give it a stab. "Instead of another, whether positive, prepared and professional. Never lie, but anticipate the questions and concerns and have answers ready.
There are several types of construction loans to choose from, but one of the most popular for people who build their own homes is a construction loan that converts to a permanent loan once the home is complete. Although there are no standard specifications for such loan, as a guideline, most only require you to pay possible closing costs once. That saves some money and makes the process easier. You do not have to go through the qualification process twice. The disadvantage is that it is next to impossible to lock-in a rate of permanent mortgage, since you will not close the loan for six months to a year.
No matter what type of construction loan you choose, you will probably require paying monthly interest on the amount of construction loan during the construction phase. The amount you owe each month depends on the amount you've "drawn" on the loan, not the total amount you are allowed to borrow. If you are approved for a construction loan of $ 100,000 but you have drawn only then that her $ 50,000 interest payment based on $ 50,000. The construction loans are interest standard (non-amortized) and are typically one or two percent above the prime rate, or what you have negotiated with your lender.
The rating for a building goes beyond the requirements of qualifying income and credit for a standard mortgage loan. The bankers or lenders will want to know you plan to tackle your project and that you can build yourself a home. A careful presentation to the bank is in order. What follows is an outline of what you need to apply for a construction loan:
* All the same financial information that you provide to get a standard mortgage loan (financial statements, income verification, credit report, etc.).
* A system of their plans (you can order several copies)
* Detailed specifications (materials and finishes you plan to use)
* An estimate of the cost
* An assessment (requested by the lender. The appraiser will use the plans, specifications, and the value of the portion to determine the amount)
* Your information in the portion (if you have the, etc.).
* The contractor makes an offer (not necessarily required, but might be if this is your first project)
You might also consider providing any other documentation you can think of will that help indicate their ability and readiness to complete your project. The bank is essentially becomes an silent partner in your project and will be treated on the home that is built correctly. The demonstration of its ability to handle the project is key here.
Friday, November 6, 2009
