How Your Home Will Be Built and What It Looks Like To Lenders

When you decide to have your home built, there are steps to take in order to make the process easier. A lender will want certain documents from you in order to be secure in the fact that you will be able to afford paying back the money they provide. This is because the loan involved in building a home is much riskier than providing a loan to purchase a home that is already there. When deciding to have your home built, you will want to consider various aspects before starting the process. A construction loan broker, such as those at OE Mortgage, can make sure that you are in the right position to obtain the loan you desire.

How Your Home Will Be Built and What It Looks Like To Lenders

Who Will Build the Home?

Some people opt to act as their own contractor when building their own home. If you decide to do this, you will want to hire sub-contractors that will eventually complete the work. The problem with building your home this way is that it proves to be much riskier to the lender. They recognize that some people may lose interest in the process after a while and they do not want to provide funding for something that will not be completed. Then, there is the option to hire a contractor to complete the work. This is the most common option and the contractor will use your money to complete the process. An agreement will be made that the contractor will do the work needed to finish the home. Lastly, there are some contractors that will build a home with their own funds. These companies tend to be larger in size as they are more able to afford the process.

Options for Funding

If you decide to be your own contractor, you may run into some issues when trying to obtain funds from a lender. Lenders generally require someone who is licensed to build a home and if you are not qualified, they will turn away from this option. If you have chosen to hire a contractor to build the home with your funds, you will likely need a progress draw loan. This type provides funding at different stages of the building process and the lender will want confirmation before each draw to ensure that the building process in on schedule. If you do come across a contractor that is able to build the home with their own funds, the type of loan you will need is a completion loan. This type of loan is only provided after the home is completely built.

There are several documents that come along with building a home and every lender will want to be completely informed about the plan to finish the process of building a home. Like all other lenders they will also want to know that you are financially stable enough to pay back the loan. With the help of a broker, you can make sure that everything is in order before you even start the process, which will allow you to focus on building the home of your dreams.

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