Ever Growing Popularity of Construction Loan Center
Construction loan center is now gaining traction among individuals all over the world. It is going to be a smart idea to take time learning about this structure especially if you want to build a house and currently in need of financial help. 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.
With this in mind, what is a construction loan that you can get from a construction loan center? Basically, this is a short term, interim loan that is 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.
Keep in mind that construction loan center follows different requirements and credit policies follow different set of credit policies and requirements when processing loan application. But don’t be so confused immediately since most are 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. Before the construction commence and if you’ve borrowed to buy vacant land already to which you’re building your new house, the first loan disbursement that’s made by the construction loan center will pay off the vacant land first.
Number 3. Providers will be breaking down the amount of loan into progress payment drawdown amount. This will be made to the builder at 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.
Just before progressing payments made to the builder, the construction loan center will arrange everything to prepare valuations. 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.