Construction loan center is actually gaining popularity and attention amongst people. If you too are seeking to build the house of your dream especially when in need of financial assistance, then it would be wise to take advantage of this scheme. 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 as s matter of fact, this is a short term, interim loan that is being used to fund the cost of construction for your dream home. The credit providers or lenders are going to secure mortgage over real estate property that you are financing and also, they are going to create periodic payments to the builder or the house developer at periodic interval. And everything is happening while the work is in progress.
Construction loan center has different requirements and credit policies that they apply 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. 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. The providers are going to breakdown the amount of loan into progress payment drawdown amounts. All this would be made to the builder at the completion of every stage of construction.
While it is true that the construction loan is virtually the same with mortgage as we know, there are of course handful of differences they have like the construction of new house should commence within 1 year of loan settlement, the construction of the house has to be done within the same year of first progress down payment, usually a short term solution with a max of 12 months, the interest is calculated against the portion of the money borrowed and been drawn down and the borrowers are expected to pay the interest during the period of construction.
The construction loan center will be arranging everything to prepare valuations prior to progressing payments made to the builder. 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.