How to Get a Contractor Loan
Constructing a house is very expensive. Until or unless you have a lot of savings which you can spend on the construction of your house, you will have to finance it. You can take loan from any bank or lending institution to hire a contractor. The loan will help you to finance the construction of your house and will keep the contractor on your work. Furthermore, the contractor will be entitled to receive payments on regular basis to purchase the necessary materials and to pay wages to the workers. Besides, when the construction will be completed, you will be able to convert the construction loan into a mortgage such as 15-year or 30-year fixed-rate house loan.
Instructions
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1
You will have to make copies of your financial documents which will authenticate your monthly income and debt obligations. The documents will include your last two pay checks, credit-card bills, most recent federal income tax return, savings and checking account statements and any other loan statement that you may have. Your lender will go through these documents to ensure that the estimated contractor payment and the monthly debt payments which you are going to make are not more than 36% of your gross monthly income.
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2
Search for a suitable lender. After selecting a lender, go to the loan officer and tell him the details about your plan of constructing a house and how much loan you need. Don’t forget to ask him all the relevant questions regarding the loan agreement.
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3
Give your loan officer all the answer to his questions. Keep in mind that he will ask you about your gross monthly income, address of your new house and your Social Security Number.
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4
Your lender will want to know about your credit or FICO score which will help him to assess that whether you are a trustworthy borrower or not. Generally, the FICO scores of 620 or higher is acceptable and you may even be eligible for the lowest interest rates, if your score is 720 or higher.
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5
Send the copies of your financial documents (mentioned in Step 1) to your lender by post, fax or email. Your lender will check your documents and FICO score to know whether you will be able to pay off the loan or not.
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6
If your lender approves your loan request, set a closing date on which you will sign all the necessary paperwork to make your contractor loan official. You will also have to pay the initiation and closing fees.
