Construction loans are a great way to get the financing you need to move your project forward. Before you take out a loan, there are three things you should keep in mind before signing the papers.
Your Credit Score Matters
Your credit score will have a dramatic effect on the amount of construction financing you are offered, and the terms. Make sure that your credit score is high enough to get the best rates before you apply. Check for mistakes on your report and clear up any past due accounts. Construction loans are hard to get on their own, if you have less than stellar credit you may not qualify.
Secure Your Construction Plans
Before you can apply or even be approved for a construction loan, you need to have concrete plans already completed. This may mean that you need to invest your own money into hiring a construction architect to draw up plans and get approval long before you actually have funding. Lenders look for detailed plans, completion estimates, and other project specifics when considering a construction loan.
Construction Loan Rate Differences
The interest rates on mortgages and those on construction loans vary greatly. It is important to know how they differ and their fluctuations. Loans for construction will also always be higher than traditional mortgages. They are much shorter in duration which is the main reason the rates are higher.