Do you need a construction loan for your new home? Getting a construction mortgage is not as easy as a personal loan. You need a lot of patience to navigate through the process of finding the right builder and obtaining a construction loan. Here is a step-by-step guide for a construction mortgage.
1) Finding the right agent.
When financing new construction, this step may not be an important one. However, it can help you to avoid contract headaches in the future if you work with an experienced agent who isn’t affiliated with the builders. You should find someone with experience in negotiating new construction deals.
To know more about construction mortgages in Toronto, contact us by following the link below:
2) Get your credit in order.
The important part of any home financing or other mortgages is your credit score. This is all about pulling out your previous credit history from any of the major credit bureaus (Equifax, Experian, and Trans Union). Please remember that your credit score is the key player that will lead to your mortgage approval from the lender.
3) Collecting your documents.
Make sure you have proper documentation of your expenses and financial history, including annual income, total debt, investments, other assets, and 401k funds in addition to your credit score. Your agent will provide a detailed list of all the documents.
5) Research builders.
You know what you can afford with a pre-approved mortgage. Now it’s time to look for a builder. Remember that the builder with a better track record is also a key to the final approval of your mortgage application. Go online and check the builder profile and the reviews of their previous customers before you finalize. We also suggest that you check their previous work in person.
6) Purchasing the land.
The land price will affect your overall pre-approved budget if you’re planning to build the home on a newly secured land. In this case, you have to think carefully about how the cost of securing land, an architect, and a builder will add up.
7) Choosing a builder and get a signed plan.
You now need to work with the builder and a blueprint you love in a neighborhood you want. You also need to make sure that the plan falls within your pre-approved lending limits.
The information you’ll need to acquire a mortgage will vary by every lender. However, you have to include the builder’s work history, insurance and references, home blueprints, specifications, a line-item budget, a draw payment schedule and a signed construction contract with beginning and end dates.
8) Applying for the loan.
Now you can bring your proposal to the lender you have chosen to receive the loan from. It’s also better to consider your builder’s preferred lender. Working with them may make the process smoother and faster. Choose the lender who gives you the best rates for your current financial situation.
9) Draw and pay interest.
Construction loans are paid out in monthly terms to your builder based on the amount of work they have done. Pay interest on your draw amounts once you have secured the necessary credits, and wait for your home to be constructed!