What can you expect in the pre-approval process and approval process and for the construction loan? This blog post will answer that question.
What can customers do to prepare for the pre-approval process?
- Get a credit bureau of your own
- Go and make sure there’s nothing on the credit bureau that doesn’t belong to you.
- Make sure the information is correct
- Don’t go around and apply to banks everywhere
- Gather up documentation
- 12 month bank statements
- 2 years of income taxes
- Other assets
- Be realistic
The homeowner can now take that number to their builder and design a house that meets their needs within that budget. Now you’re back on the bank, what happens next?
What can customers expect in the approval process?
- Order an appraisal
- Set up the construction loan
- Open an escrow account
- Add a title company
What does the title company do?
They manage the funds and they manage the draw schedule.
What’s a draw schedule?
- Through each stage of the construction process, the title company would issue money out to the builder as they complete each stage
- The buyer would make an interest only payment based on the balance that’s carried at the time
Hopefully, then, the homeowner can roll over to a build-to-construction loan, where it’s interest only payments, to permanent conventional mortgage, so usually 15-30 years are common terms.
That pretty much covers the finance process from start to finish.