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. Prior to joining the bandwagon on the other hand and apply for a loan, it is essential that you have deep understanding of the loan.
So what’s with a construction loan offered by 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 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. This is while the work is still in progress.
The construction loan center has various requirements and credit policies that they are adopting when processing the loan application. But don’t be so confused immediately since most are the same. By reading the next paragraphs, you’re going to know about how credit providers or lenders fund the construction loan.
Number 1. To be able to cover for the cost of buying vacant land and building the property at the same time, these said entities are going to fund the amount of loan that the client needs.
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 construction loan is nearly the same with the traditional mortgage that you know, it has a number of differences similar to the fact that the interest is calculated against the portion of the money borrowed and been drawn down, it is usually a short term solution with a max of 12 months, the construction of the house has to be done within the same year of first progress down payment, the construction of new house should commence within 1 year of loan settlement 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.