Getting approved for a construction loan is important. However, the process of securing the financing doesn’t have to be difficult. With the right people and the right documentation, it can be a relatively smooth process. Today, we’re going to talk a little bit about how to get a construction loan, and how to find one that’s right for you.
First, let’s define what we’re talking about. Construction finance is generally considered to be a short-term loan, and the funds are used to pay for the real estate that you’ll be building. House building finance, on the other hand, is basically a large credit line that a builder receives, but only until the property is fully rendered. The borrower will draw funds as needed on the loan during the life of the project. Once the project is completed, the portable loan that’s been drawn upon collects interest. To fully pay off a construction loan, the borrower often will need to secure a line of permanent financing.
Now that we know what a construction loan is, let’s talk about the process of getting one. The first step is for you to devise a realistic budget, and if needed, you can do this with the help of a construction finance specialist. A detailed budget is a big deal since it says to your potential lender that you have an intelligent and cost-effective plan for your project, and you’re aware of your spending limits, You may also want to have your personal income and debt well-organized. If there’s a discrepancy between personal income and the amount you’d like to borrow, a good lender can help you find a more realistic amount.
Join us tomorrow as we continue our discussion about the construction loan process.