One of the biggest dreams that most people have is being a successful business executive and building a beautiful home of their own. However, getting there can be a bit stressful. Even as top CEO’s and CFO’s in the construction business, most people fail to realize just how challenging it can be to get a construction loan to build their new home. Usually, you will have to prepare yourself to get a loan much the same way as a business would. Why should you consider a construction loan? First you have to understand what they are and what they can do for you.
Construction Loans Basics
What are construction loans? Obviously, they are finance solutions to fund construction of a home or other property. These loans are typically very short-term, with a repayment period maximum of about a year. These rates are higher than mortgage loan rates in most instances, unless you use bank reconciliation processes to improve your status. In order to secure a construction loan, you will need to have a timetable for the construction to be done. You should also be prepared to divulge your budget and detailed plans for the property. If you are comfortable with these construction loan requirements, you can begin your search.
Two Types Of Loans
There are two types of construction loans to choose from. The type of construction loan you take out will depend on the type of construction project you have in mind and the loan payment process you prefer. The first of these financing options are construction to permanent loans. These loans are used to pay for construction before you move into a home. Then once you move in, your construction to permanent loan changes that loan balance into a permanent mortgage. This a great option for first time home buyers. Stand alone construction loans are the second variety available to borrowers. These stand alone construction loans pay for the construction of your property. That is it. Then, after moving into the property, you will be forced to take out a mortgage to pay off the rest of the construction debt. It requires two separate loans to do the same thing, which means more invoice finance documents to deal with. Keep these two options in mind.
The first step is getting the right lender chosen. Not every lending institution will offer this type of loan, which means you will have to do a bit of research to find out which lender can best suit your needs. Here are a few things you have to consider when trying to get the right home construction loan.
The Best Lender
The first thing you need to do when trying to get the right home construction loan is to find the right lender in your area. There are usually a number of different business loan and individual loan lenders in your area that can provide you with this type of loan, which will require you to do a good bit of research. The time and effort that you put into this research will be more than worth it in the end.
The next thing you will have to worry about when trying to get the right home construction loan is the amount you have to put down. The amount of down payment will depend solely on the type of loan you get. Of course, for company executives, a higher salary also allows you to pay more upfront instead of interest charges later on. Before committing to a loan, you will have to find a way to figure out what the terms are and whether or not they can benefit you. The more you are able to find out about the loans available to you, the easier you will find it to get the right results out of this process. Keep in mind, business executives like yourself will have higher negotiating power if you can pay more on the down payment.
Debt To Income Ratio
Another very important thing that executives have to consider when trying to find the right loan for home construction is your debt to income ratio. In order to get approved for the home loan you want, you will have to get a low income to debt ratio score. That is why it is so important to know the value of debt management programs. The time and energy you put into going over this metric with your lender will be more than worth it in the end. Be sure to cover all of the bases before you commit to any one loan. Just like a business credit score, the ratio allows financially responsible company executives to secure better rates.
When choosing a professional like personal loans, you will be able to get the loans you need and the help to decide what is the best option for your particular needs. They have been in the business for years and have helped a number of Toronto executives get the loans they need to build their dream homes. Now that you are successful CEO, it is time to start living like one.