This post is a part my Construction Loan Series. The other post in this series are:
How Does A Construction Loan Work
Obviously different banks and lending institutions have different construction loan requirements. Therefore, you should at minimum talk to three different lenders about what their requirements are and what the range of rates and terms they offer for their construction loans.
Let’s get started with a general overview for Construction Loan Requirements:
Interview Banks – some banks lend at 80% to cost and some lend 80% to appraised value, find out what the standards are for your bank. Also, interview several banks for the best rates and terms for you.
Get Organized – know what banks are going to require to make an official application. Most banks require the following
- A copy of the construction agreement with your builder, which must specify the cost of your home including options, upgrades and lot value
- If applicable, a land contract for the lot on which your house will be built
- A copy of the floor plan and facade of the house if applicable
- A deed to the lot, if applicable
Closing Your Loan – the “first” closing of a construction loan is important because you will need to either bring cash to closing or put the closing costs in as a part of your loan.
Drawing On Your Construction Loan – When your down payment funds are exhausted, you can begin drawing funds from your construction-to-permanent loan. You will not start making interest payments until you begin using these funds.