Tips for getting a construction loan
Getting a construction loan is not as easy as getting other types of loans. It might seem similar to a home loan. I mean, after all, you are buying a home, right? But it's not quite so easy. A home loan is money for something that already exists and has value. A construction loan is money for something that will potentially exist. There is a lot more risk involved in shelling out real money for something that is only exists hypothetically. Be aware going in that construction loans are more involved than home loans. Prepare to spend more time, sign more papers, and endure a more rigorous application process than when getting a home loan.
Clean up your credit-before you begin shopping for a construction loan you should do whatever you can to clean up your credit report and improve your credit score. The first thing you should do is obtain a copy of your credit report. This is yours for the asking and you can go online to download it. Read it carefully. If there are any items that you believe to be incorrect, you should address them. You can write a letter to the creditor disputing the claim and asking for an investigation.
If you have delinquency items that are still on your credit report but you are currently in good standing with the creditor, ask to have the delinquency removed. Some creditors will do this because, although you were once troublesome, they now appreciate you as a paying customer.
Do your homework-throughout the entire loan process, you should be educating yourself about construction loans and finance. There are many different kinds of loans and many different kinds of lenders. There are also classic "bait and switch" scams to watch out for. Read some books on construction finance and find out as much as possible so that you not only are able to get the loan but you also get the best deal.
Pre-qualify-there will be no construction loan if you don't prequalify. Prequalifying for a construction loan is the same as prequalifying for a home loan; only the application process might be a little longer. To prequalify you will need to fill out a loan application. This application will include all of your financial information so come prepared with your paperwork
You will need the things that you would need for a job application, for example, names and addresses of your current and former employers as well as your social security numbers and all other numbers. You will also need your financial records from your checking, savings, and credit union accounts. Bring in the account numbers for all your credit cards, your income tax statements from the past two years and pay stubs from your current job.
Don't give up-if you are unable to prequalify from one lender, keep looking. Different lenders have different standards. You may need to look around until you find a lender that is a good fit for you.
Find the best loan for you--Once you get prequalified you will be able to shop for the loan. Check with different lending agencies or find a construction loan specialist who can describe the different kinds of loans. You will find that some loans will roll right over from construction loans to mortgages. This is a convenient way to get your loan because you will really only have to deal with one loan. It just comes in two parts.
Remember that nothing is free-if you find a deal that seems "too good to be true", be very skeptical. Things that seem to good to be true generally are. If you know someone who has built recently, find out what they did for the construction loan. You can learn a lot from the experiences of others.
Like this article? Then Digg It
or
add it to your Del.icio.us Bookmarks!
Tags: construction construction_loan finance financing loans prequalifying loan_applications credit credit_scores lenders
