Building your house comes with a lot of advantages. For one, you have the freedom to select a designer, architect, and contractor. In a way, you can control what your home would look like once it’s finished. This process, however, can be tedious and more expensive compared to buying an existing property. Good thing, construction loans are available to help people build their dream house.
If you want to build your home, but you don’t have enough money to pay for the cost of construction up front, here’s a quick guide to applying for a construction loan:
1. Look for a Qualified Builder
Many banks and lenders are strict with their construction loan requirements. After all, they will be lending money for something that doesn’t exist yet, so they don’t know whether they’re making a good investment or not. One way to assure the lender that your future home is of high value is to present a qualified contractor who will build it.
2. Present Detailed Specifications
You need to show exact specifications of your construction project, from the floor plan to the materials you will use. In some cases, you also have to show an estimated value of your future home. Though the property doesn’t exist yet, an appraiser can project its value by looking at the cost of the land and the prices of existing similar homes in the area.
3. Prepare for a Large Down Payment
Typically, many banks and lenders require a minimum of 20% down payment for their construction loans. Other lenders require as much as 25% down payment to assure the lender that you are committed to the project and won’t escape your responsibilities if things go wrong. It would be better if you shop for the best mortgage company in Utah before you sign any loan agreement. A loan agent with experience in construction loans can help you find the best deal and rates in your area.
With these few tips, you’ll be better prepared for a construction loan application, bring you one step closer to building your dream house.