It’s been almost a decade since I have meddled into residential finance consulting, and securing construction loans. I have come across both the best and the worst ways to go about construction finance. Furthermore, working on a personal project has broadened my knowledge on how tested and proven financing principles if neglected can cause chaos on a project.
With these tips, if implemented judiciously, you would enjoy great benefits when it comes to acquiring construction loan.
- Ensure You Spend Cash judiciously; make sure that cash from the draws are spent on projected construction only. Using money from your draws on other expenses is a great way and proven method to prematurely thwart the dream of owning a home. Spending your construction loan on other needs other than the building project is a sure fire way of killing your dreams.
- Make sure that your construction budget also covers unforeseen circumstances including inflation, theft and overages. Some, if not all of these things, are bound to happen. Chances are that there may be cases of theft on site, either by a worker or a stranger or a professional thief. Either ways, brace yourself for the occurrence of such incidence and also make account for price differences, as building materials price may skyrocket during the construction process. Failure to do this will make you spend more than expected and delay the project completion duration. It is also important to emphasize on shortages during construction too, as materials budgeted may not be sufficient.
- Be Sure to Hire the services of a Seasoned Construction Loan Expert, this point can never be too overly emphasised, as failure to heed to this advice will most likely cost you running into loss of several thousands of dollars. Ensure you work with a professional with in-depth knowledge on how construction loan works. By so doing, you will feel protected and have peace of mind during the construction process
- Interest Rates expires Before Completion Of Construction. most times this situation can be avoided. Your Construction loan expert and the building contractor on site should be able to work this out. All you need do is to give adequate time for construction. If the building contractor tells you that the construction will be completed within 5 months, then you should lock your interest rates for a minimum of 7 months. This may cost you a little more in loan repayment, but a whole lot more if work goes slower than expected. However, you can always request for a pro-rated refund if you did not use the extra month.
- Choosing The Wrong Construction Loan Package. Although there exits just 2 basic construction loan to choose, but selecting the wrong one could be detrimental. This alone justifies the reason why you have to always pick seasoned professionals in the construction loan market.
If you follow these 5 rules judiciously, you are sure to be one step closer to building your dream home without much stress.