If you are considering building your dream home, rather than purchasing it, you are instead looking at a construction loan rather than a traditional mortgage.
What will I need for my construction loan request?
Remember, when seeking a construction loan you're asking a lender to loan you money on your dream. As a result, the lender will need to see that you have taken into consideration everything involved in the process. It is because of this that construction loan approval is often more strict than traditional mortgage financing. In addition to standard credit documentation, your lender will likely want, at a minimum, copies of the following documents to start the process.
Documents required by lender:
- Final Plans and Specifications
- These are needed for the appraiser to arrive at your "as completed" value.
- House plans should be stamped by the architect who has created the plans.
- Purchase & Sale Agreement
- This will be on the land or your Settlement Statement if you have already bought the land.
- Specification Sheet
- This outlines, in detail, a description of all the materials being used.
- Cost Breakdown
- Of everything required to demonstrate a need for the funds being requested.
- A contract with a general contractor if you are using one.
- Building Permits
- This demonstrates the value of the home when completed according to the outlined specifications.
The borrower, the proposed property, and the builder may all be considered in the approval process when securing a construction loan. This type of project may require a down payment or additional funds verified for "Post Closing Liquidity."
Your estimated available borrowing power on a construction loan will vary based on:
- Credit score
- Property location
- Other existing financial obligations
- Potential value of the home being constructed
Rates and terms vary depending on many factors as well, so we recommend that you contact your mortgage provider for an accurate quote.