Construction loan center is now gaining traction among individuals all over the world. It is going to be a smart idea to take time learning about this structure especially if you want to build a house and currently in need of financial help. On the other hand, prior to joining the bandwagon and get a loan, it is vitally important that you have thorough understanding of the loan.
With this in mind, what is a construction loan that you can get from a construction loan center? Basically, this is a short term, interim loan that is used to finance the construction cost of your dream house. The credit providers or lenders are going to secure mortgage over real estate property that you are financing and also, they are going to create periodic payments to the builder or the house developer at periodic interval. All of this while the work is in progress.
The construction loan center has various requirements and credit policies that they are adopting when processing the loan application. Majority of them on the other hand are basically the same. Following is a quick list of credit providers or lenders fund construction loans.
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. Prior to the start of construction and if you have borrowed money to buy the vacant land to which you will be building your new house, the first loan disbursement that is 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 the construction loan is almost the same with conventional mortgage, it comes with several differences like the fact that it is usually a short term solution with a max of 12 months, the borrowers are expected to pay the interest during the period of construction, the interest is calculated against the portion of the money borrowed and been drawn down, the construction of new house should commence within 1 year of loan settlement and the construction of the house has to be done within the same year of first progress down payment.
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.