Construction loan center is now gaining traction among individuals all over the world. 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, prior to joining the bandwagon and get a loan, it is vitally important that you have thorough understanding of the loan.
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 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. And everything is happening while the work is in progress.
The construction loan center has various requirements and credit policies that they are adopting when processing the loan application. Majority of them on the other hand are basically the same. Following is a quick list of credit providers or lenders fund construction loans.
Number 1. These entities will be funding the amount of loan required by the client to be able to cover the entire cost of buying vacant land as well as the cost of building the property.
Number 2. Just before the beginning of the construction and if it happened that you have borrowed the vacant land already where you will be building your new house, the first loan disbursement that has been 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. All this would be made to the builder at the 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.
The construction loan center will be arranging everything to prepare valuations prior to progressing payments made to the builder. This will be done at every construction stage from buying of vacant land, laying of flooring, installation of roofing including the frames, lock up stage and lastly, the completion stage.