Wanting to Build your Dream Home?
December 29, 2017
As you envision your own home, images of a gorgeous bedroom, sumptuous kitchen, and closet galore keeps ringing in your mind. But you can never forget about the important aspect of getting that home—financing. As you plan to build your new home, it is important to ask yourself how you would get the construction funds. In many instances, many lenders will present themselves to draft us the loan we need for our dreams to become true, but few people understand how the loans work. Here are few tips about construction loan that you need to understand before going to a lender.
How do I qualify?
In most instances, lenders require that you deposit at least a 10% down payment of the total project. This is usually accompanied by documents that prove your home project is commencing in the nearest time. Such should include a building contract signed by a licensed, reputable builder, approved council building plans, quotes for activities included in the home project cost, and the insurance policy of the builder which should cover the price of the dream home.The lender will also want to know whether you are able to pay back the loan. As such, you will be expected to present evidence of your income, liabilities, and assets.
Pay as I go?
One of the most attractive components of construction loans milwaukee wi is the connectedness with the building progress. Lenders tend to link the loan disbursements to specific milestones including, land purchase, mobilization deposit offered to you, slab costs, frame construction, lockups, fit-outs, and the completion of the project. This means that the loan is usually given in installments, and the interest you are expected to pay only covers the amount received rather than the whole loan.
Always review the loan fee structure; is there additional fee to be made in every progress payment made? This is important since it may result in a huge amount resulting from the different milestones. Also, check if your lender stipulated the project completion period which may range from 6 months to 24 months. Make sure your home is built within this period; otherwise you will be forced to ask for an extension.
Consider interest only loans
An attractive feature that will help alleviate your loan burden is the “interest only” in the construction phase (say 7 or 12 months). Such loan plan will only require you to pay back both principal and interest once the project is completed. This ensures that manage your cash flow easily without strain.
How do I claim a progress payment?
Your lender will be releasing progress payments. But they will only do so as soon as you provide the needed receipts and bills from your builder. Payments must always be made directly to the builder’s account.
Get sound advice
Sometimes understanding how the loan process functions are very overwhelming and you may miss considering some important factors that may influence the total amount you spend on repaying the loan. To avoid any uncertainties, it is important to get advice from a trusted expert who will be able to explain everything about construction loans in details. The expert should also recommend to you the most affordable and efficient lender around you.