Ever Growing Popularity of Construction Loan Center
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. On the other hand, it will be very important that you have good understanding of what the loan is about just before you jump to the bandwagon and apply to get one.
So what is a construction loan offered by a construction loan center? Well, it is basically a short term, interim loan used to finance the construction cost of your dream house. The credit providers or lenders will be securing a mortgage over real estate property that you’re financing and they’ll be creating periodic payments to your builder or house developer at periodic interval. This is while the work is still in progress.
Keep in mind that construction loan center follows different requirements and credit policies follow different set of credit policies and requirements when processing 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. 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 would then breakdown the loan amount 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.
Just before progressing payments made to the builder, the construction loan center will arrange everything to prepare valuations. 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.