Applying For A Construction Loan

If you are somebody who is interested in applying for construction loan, there are a variety of steps that need to be taken to actually qualify for this type of construction loan. We are going to talk about what some of these steps entail so that you have a better understanding of what you’re getting yourself involved with.

The very first thing you need to do is make sure that you have a complete set of financial records spanning the past several years. To the extent you don’t have this documentation, that’s okay, but you should then have some documentation explaining why you don’t have any financial statements to cover the past several years. It could very well be that your business is brand-new, were there for whatever reason you do not have any individual tax returns to show because you are not earning any money. The point is, you need to have something that’ll loan officer can look at to determine whether or not you are making any money that you can then utilize to repay the loan at some point in the future.

A Business Plan For A Construction Loan

In addition to having financial statements, it is also critically important that you have a basic business plan that outlines what you were going to do with the construction loan. If this happens to be a construction loan for personal residence, then your so-called business plan will not be so much about business but more about what you are going to be doing that will enable you to repay the loan. This might mean talking about the type of job you have, or talking about the type of business you own and operate. Regardless, you need to have some type of document that outlines exactly where the money is in a come from to pay for the construction loan. Once again, this does tie in with having relevant financial statements. The construction loan officer is not just to look at the paperwork and make a decision in a vacuum — you will need to explain a little bit about why you are asking for the loan and how you plan to pay it back.

Making a determination as to whether or not you are a good credit risk has evolved from simply looking at numbers on a computer screen is speaking with people you have done business with in the past to make a determination as to whether or not you possess the character traits that a financial institution is seeking. This may sound subjective and somewhat unfair, but more and more financial institutions are seeking ways to better determine whether or not an individual is credit worthy. So you need to be prepared to provide references.

Finalizing A Construction Loan

Once you have all your documentation in place, you will go in for a meeting with the construction loan officer. To the extent some additional information is required, you will probably be told about that at the meeting itself or soon thereafter. Most decisions about whether or not you qualify for a construction loan typically take place within two weeks.

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