Are you looking for a quick source of financing to get your next construction project off the ground? Do you sometimes worry that you’re not getting the right loan to meet the needs of your construction business?
The US is behind more than five million homes when it comes to keeping up with demand. That means it’s a great time to build a quality spec home.
Construction loans for spec houses might be the right product for your needs. Here’s a guide to the basic requirements of a spec construction loan.
How To Get A Construction Loan
The conditions to get a construction loan to build a speculative project are a bit higher than a standard home loan. That’s because the lender won’t use a home as collateral.
Every lender will have slightly different requirements for a construction spec loan, but most follow a similar approval process. To get the approval, you will need to consider these points. Check this site for some great tips on spec construction loans for builders.
A Good Credit Score And Income
Your credit will need to be good or excellent to get your financing approved. You can improve your score by paying down debt and paying your bills on time every month.
Your score depends on how much credit you use, so don’t make any large purchases in the months before you apply for a spec construction loan. Your income must be large enough to show that you can meet the monthly payments over and above your regular expenses.
Your Building Plan
A lender will want to see a detailed plan for your project. They’ll want to see completed blueprints and specifications for the home you will build with the money you borrow.
Preparing a detailed budget for the project will improve your chances of obtaining the loan you need. Proof of land ownership or an accepted offer to purchase the land will support your request.
Your lender wants to know who your architect and builder are. They will want to see proof that they’re accredited and insured before they consider going ahead with a builder construction loan.
A signed contract with the builder should outline the responsibilities of every party involved in the project
A Large Down Payment
Most lenders will want you to put up a down payment of around 25 percent of the total construction costs of the home. Some lenders will allow you to use the equity in your land as part of your down payment, so be sure to ask the question.
The total down payment needed will vary by lender and may increase depending on your credit score and income level. You may need private mortgage insurance in some cases.
Apply For Construction Loans With Confidence
When you understand what you need to get your loan approved, you will bring the right information whenever you apply for construction loans. Taking the time to do your research can help you present the best proposal to your lender.
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