Refinancing a construction loan – Essential steps you should follow

By Rikk M posted 12-03-2012 21:48

  

Do you want to take out a construction loan? If yes, then you will have to show your lender that you will be able to make the loan payments on time and the property’s value will be much more than the amount you will borrow. So, if you want to purchase your own home, a construction loan seems to be a suitable option for you to accomplish your long-awaited dream. You should take out a loan that you will be able to pay off within a definite time period. In case, you fail to do so, you may refinance your construction loan so as to make the payments affordable for you.

 

3 Steps to refinance your construction loan

 

If you are finding it difficult to manage the construction loan payments, you may opt for refinancing. Have a look at the 3 steps to refinance your construction loan.

 

  1. Search for construction takeovers – It is quite difficult to search for construction takeovers in the present market. If you are reaching your time limit for the completion of construction loan payments and the home is yet incomplete, you will have to look for a mortgage broker who will deal with several banks. This will provide you more chances of searching for the lenders who will actually be willing to purchase your old construction loan, offering you more money and time to end the project. However, you need to know that all construction lenders will not want to purchase and take over an existing project.

 

  1. Apply for a refinance loan – If you are late by 45 days from the approximate end of your project, you may apply for a refinance loan. In case the project is nearly complete, you should not waste any time in making an application with a lender. Once the home is complete, the appraiser will do a final assessment on the home stating it is completed according to the plan and is still valued at the original price. Your builder will have to offer you a Certificate of Occupancy (CO) from your county building department. This is a final examination that indicates that all stages of your home are complete. Give the new lender your insurance information as your builder's risk insurance will become your homeowner's insurance.

 

  1. Request for a time limit from your builder – You may request for a time limit from your builder when he assumes that all stages of construction will be completed within a particular time period. This is required in order to organize the final inspections prior to the closing and fixing a closing date. Taking out a new construction loan means repaying your old construction loan and as such, you should make it a point to find out when the new lender requires all construction and want to work on your project.

 

Thus, by following the above steps, you will be able to refinance your construction loan.

 

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