Know Your Options
When it comes to construction loans, there are quite a few different options, so it’s important to find the best one for your needs, which leads us to our next point…
Meet with construction loan officers at a few different banks to see what they’re offering. Ask lots of questions so you know your facts. But don’t stop there. Search online for construction loan brokers in your area as well. These brokers can have connections with many banks across the country in order to score you the best deal. Plus, their services are free.
Enter Into a Contract Agreement
As part of the process, you’ll also have to create a “builder’s package,” which contains the written contract or agreement you have with your contractor or builder about their agreed-upon duties and responsibilities and fees, as well as provisions for potential changes to your original plans.
To get a construction loan, banks require you to have Course of Construction Insurance, also known as a “builder’s risk” policy (a policy providing coverage on buildings under construction against fire, lightning or vandalism), and General Liability Insurance (which you or your builder can provide). Workers’ compensation might also be necessary, depending on the number of employees your builder has, for those who may become ill on the job to still get benefits and medical care.
Submit Your Application
Once you have done all your research and planning and decided on a loan, the loan officer will give you an application form to fill out with your basic financial history. This form, along with your credit report, will help the bank determine whether or not you qualify for the loan.