Construction Loans

Looking into a construction loan for that new home?  But you don’t know anything about construction loan?  Well, here is some basic information that you should know before applying, so you will know what to expect and what you will need:

Most construction loans are “All In One Construction Loans”, and usually convert into a traditional mortgage as soon as the construction is complete.  This means that you can enjoy the benefits of a construction loan, while not worrying about applying for a mortgage as soon as the building is complete.  You have already taken care of the whole thing from the start. 

Other types of construction loans are out there though, if an all in one construction loan isn’t for you.  There is a construction only loan, which only carries the note until the construction is complete, and then the balance of the note becomes due.  After the construction is complete, you will need to decide on a traditional mortgage or another arrangement to pay the note off completely.  The payoffs for construction only loans varies by stage of construction, so you should check with your lender for a schedule of their stages so you will always know where you stand during the construction process.

Most companies who offer construction loans offer different programs for these types of loans.  While a traditional mortgage is based on the building or home that is already standing, construction loans are based on the value of the home or building after it is completed.  Of course, they do look at the construction costs as well, so before you go in to meet with your lender, make sure that you know what they will need to process your application.

During the application process, there are many different items and information that you will need to give to your lender for them to consider your application.  Here are a few pieces of information that you might need when meeting with your lender:

1. Your employer’s information – address, phone number, etc.  Most lenders will want your recent paycheck stubs and other information, like overtime, bonuses, and such.
2. Personal information – your social security number, address, phone number, any co-buyer information, dependent information, and any other financial information or personal information that can help them in determining if you are able to pay the loan back.
3. Land information – a copy of the deed if you already own the land or the information on the purchase of the land where you want to build.
4. Complete information about the construction project itself – all the details of the materials, building company, labor, and any other pertinent information that deals with the construction process itself.

When you head in to the lender’s office for the interview about your construction loan, the loan officer handling your loan will go through all the information that you need to know about their company and the services that they offer to borrowers.  They will be happy to explain the different types of construction loans and current interest rates, as well as any other information that you will need to determine if this is the right type of loan for you.  They will also be able to help you in filling out the application and answer any questions that you might have, like current interest rates, payment schedules, penalties, and other charges. 

If there is anything derogatory on your credit report, your loan officer will discuss it with you at this time to make sure that they are comfortable with lending you the money and you are comfortable with repaying the loan.  Sometimes certain issues will need to be resolved before a lender can make a decision about your loan, your officer will go over any of these issues at this time as well.

Overall, just make sure that you ask enough questions before, during, and even after the interview is you are not sure about anything.  Your senior mortgage advisor wants to make sure that you are comfortable with their company and their loan before anything goes wrong, so they will always be happy to answer questions for you.