Qualifying for a Construction Financing Loan

Building a new home? Adding on to your existing home? Buying investment property? Whether you’re a homeowner, flipping a house for profit or even a professional builder, building or renovating can be a rewarding experience.

It can also be a far more rigorous financial process than getting a standard loan or a second mortgage.

If you’re planning on building, you may qualify for a construction financing loan (a short-term loan with a set term to provide the financing you need to create the home or home renovation of your dreams).

How to qualify for construction financing

Banks and mortgage lenders are cautious about lending money for something that doesn’t exist yet, even with the assumption that it will hold a certain value when it’s completed. Understandably, this can present some difficult financial challenges. This where an experience InTrend Mortgage agent can help you prepare your application based on their years of knowledge.

With extensive knowledge in construction financing loans, InTrend Mortgage agents will do everything they can to help you qualify. They will guide you through the complicated process from beginning to end, explaining all the important steps you need to take along the way, including:

• Ensuring you have a qualified, licensed builder with a solid reputation
• Providing detailed specifications such as floor plans, materials, measurements, etc.
• Having your future home and the land it’s being built on appraised to the best of your ability
• Calculating your down payment cost (usually 20-25%) and ensuring you can provide it

What happens once you get approved for construction financing?

After approval, the ball starts rolling as things fall into place. The lender begins to pay out the money agreed upon in the loan with a schedule of draws at certain points in the process. For example, the contractor may receive 10% upfront, another 10% once the foundation is poured, another 10% when the frame is up, etc.

The frequency and amount of the draws are determined in advance between the contractor, the buyer, and the lender. The buyer gets the end loan (which includes interest on the borrowed amount) only after the home is built and the draws have been paid.

Call us today at 905-415-8488 for help applying for a construction financing loan.