There will be many people involved in your construction loan process. Knowing the responsibilities of each party is essential to navigating the process. The loan process can vary considerably from one state and county to another, but this is a general overview of the process, featuring the major players in your construction loan process.
The Construction Loan Process: The Cast of Characters
The Loan Processor: This bank or lending institution employee will collect all the information regarding your loan, and put it in a loan file to submit to the underwriter. The loan processor will be your primary contact at the bank for all your loan questions.
The Loan Officer: The loan officer is another bank/lending institution employee who assists you in filling out loan application forms. The loan officer also helps the loan processor to assemble the necessary paperwork for your loan file. Often the loan officer is a good source of information. The loan officer can serve as your primary contact with the bank as well as the processor.
The Appraiser: An appraiser determines the actual value of the home you plan to build. If the appraiser cannot determine the value of your home, based on the plans, to be equal to or greater than the loan amount, the loan may be denied, even if you qualify as a borrower. Overbuilding for the area or lot, or creating a building which is too ‘unique’ may result in a lower appraisal than one would expect. The appraiser is looking at resale value only, not any sort of intrinsic or artistic value.
The Underwriter: A higher ranking lending institution representative must sign to allow your loan. Assisted by advanced computer programs, the underwriter must determine that all the information required for the loan is in order.
The Closing Agent: In most states the closing agent is an attorney of your choice, who officiates over the closing. He insures that each paper is signed properly, and that all the related business details are in order. He will assemble all the loan papers, all the home builder contracts, and all the appraisals, inspections and other details involved with the loan and the builder’s contract. Part of the job of a closing agent is to act as your attorney, protecting you from any form of fraud. This is very important in buying a home that has already been built, and also in buying a lot. Part of the Closing agent’s job is to research the deed to make sure the land sold to you actually belongs to the seller, and that there are no liens against it.
The Insurance Agent: You will need to contact an insurance agent to insure your home as it is being built. The loan officer will explain what kind of policy you need, but you must obtain the insurance yourself in most cases.
The General Contractor: Your home builder or contractor will be an integral part of the loan process. His reputation has a great deal to do with how your loan application is welcomed by the local banks as well. If they do not feel your contractor is qualified to build a home worth what you are borrowing, you may be turned away.
The Sub Contractors: Owner builders must assemble their sub-contractors to help them get a loan, while your general contractor will be sufficient help for the loan process. Still it is possible that sub contractors may be involved in the loan process if they are installing something unusual with enough value to impact the amount of the loan.
The County Building Department: The building inspectors as well as the officials who grant building permits work out of the county building department. It is important to discuss with them at length, your home plan and your lot in order to get a building permit. Sometimes your building contractor or home builder will handle these details for you. There must be a building permit before you can build your home, and it is usually required before the loan can be issued.
There is much more involved in the loan process, but knowing the people involved is more than half the battle. All these people are on your side, and want you to have the loan. Most people in these positions are more than eager to help you. Learn as much as you can about the characters involved in the construction loan process.