Today, there are more and more people who are beginning to know about construction loan center. If you are planning to build the house of your dream particularly when you are in need of financial support, then it is going to be smart to know more about this. On the other hand, it will be very important that you have good understanding of what the loan is about just before you jump to the bandwagon and apply to get one.
So what is a construction loan offered by a construction loan center? Well, it is basically a short term, interim loan used to finance the construction cost of your dream house. The credit providers or the lenders are going to secure first a mortgage over real estate property that you will be financing; then they are going to plan a periodic payment to the builder or house developer at periodic interval. All of this while the work is in progress.
Construction loan center has different requirements and credit policies that they apply when processing the loan application. Majority of them on the other hand are basically the same. In the next line is a list of credit providers or lenders funding the construction loan.
Number 1. These entities will be funding the amount of loan required by the client to be able to cover the entire cost of buying vacant land as well as the cost of building the property.
Number 2. Before the construction commence and if you’ve borrowed to buy vacant land already to which you’re building your new house, the first loan disbursement that’s made by the construction loan center will pay off the vacant land first.
Number 3. Providers will be breaking down the amount of loan into progress payment drawdown amount. This will be made to the builder at completion of every stage of construction.
While it is true that the construction loan is virtually the same with mortgage as we know, there are of course handful of differences they have like the construction of new house should commence within 1 year of loan settlement, the construction of the house has to be done within the same year of first progress down payment, usually a short term solution with a max of 12 months, the interest is calculated against the portion of the money borrowed and been drawn down and the borrowers are expected to pay the interest during the period of construction.
The construction loan center will be arranging everything to prepare valuations prior to progressing payments made to the builder. And you must know that this will be performed from buying of vacant land, laying of flooring, installation of roofing including the frames, lock up stage and lastly, the completion stage, basically at every construction stage.