Fast Financier – How a builder impacts your construction loan
Custom building your own home is the best way to get your dream house. Whether you’re a first-time buyer or a seasoned home owner, when you’re ready to build something of your very own, the key is planning. There are certain steps necessary before the first shovel of dirt is moved. In fact, you have to own the property from which that shovel is scooped – plus you have to finance the home that will be on it. As builders, we get lots of questions on lots. A parcel of land can be financed by construction loans or bought outright. Talk to a local realtor for availability and market conditions. Find a banker who will work with you on pre-qualification and lending – specifically construction lending.
Ask your banker about a construction loan. Many banks don’t offer these types of loans because they are a lot of work – but so is getting a worthwhile end product. Smaller, community banks are more likely to offer this service. They want to get to know you, when the larger banks don’t want to face the challenges inherent with a more complicated loan.mIn a construction loan, money needs to be disbursed at key intervals as the builder finishes the primary milestones of the project. The building site must be inspected each time before money is released.
In addition to the loan application paper work, any home mortgage loan will require proof of employment and steady income, proven by submission of 30 days of pay stubs. The bank will want to review your credit history as reported by the three credit bureaus and your on-time payment record. If you have a few black marks next to your name, take the time to explain the circumstances to your banker. That’s why you have a personal banker – so that any personal issues can be addressed and not stand in the way of your dream home. The bank will also take into consideration your down payment, or portion of the home and property you can pay up front. A construction loan adds the requirements of a detailed blueprint and a custom builder in good financial standing.
The construction blueprint is necessary for you and the builder to be certain you are on the same page for design and construction. It is the basis of your new-home estimate, and the plan that will guide you from ground-breaking to house-warming. The blueprint also acts as guide for the bank on money disbursements. The bank inspectors will be watching the builder’s progress in phases, and if they don’t feel enough has been done at the conclusion of each phase, they won’t disburse the funds to the builder. While this could affect the construction timeline, it is also protecting you by not paying for unfinished work. The blueprint is both a valuable plan and an organizational time line.
The custom builder you choose for any job – a home addition, remodeling or custom building — should also be a profitable, fully licensed and insured, experienced tradesman. You should not even entertain the thought of a builder wallowing in debt. He will bring you and your brand-new home or addition down with him. His record will prevent you from getting the necessary financing. If you don’t know a builder or are looking for one who is a good financial risk, you may want to choose from among those with whom the bank has previously worked. Any custom home builder you interview should be in good financial standing.
The construction loan usually transitions into the home mortgage loan, and often, the bank combines the settlements of the two loans. Having a single settlement saves you both money and time. You can bring the total amount of your down payment to the settlement, and there will only be one meeting. The bank will take care of the re-payment process.
Choose your bank and your builder carefully. Researching the internet for potential custom builders and banks with new construction loans is a good idea, but just as meeting personally with a builder is an important step in determining your selection, personally meeting with your banker can result in just as many advantages. They can help you if you have any hurdles to overcome in the loan or building process, and they can make or break your new construction experience.
