The new construction loan process consist of three important steps. Let’s walk through all five so you can get a feel for the overall process.

New Construction Loan Process Step One: Preparation

New construction loan process preparation includes the following:
1) Check your credit scores.
2) Improve your scores.
3) Save one third of your income paying into your savings account as if it were a loan obligation. While loans vary, most construction loans require a down payment of 20 or 30 percent of the value of the completed construction, including the land.
4) Stop maintaining a balance on your credit cards. Pay them off each month on time.
5) Start paying all your bills on time.
6) Stop owing any other money. Pay off your debts, including:
• Credit cards
• Car loans
• Old forgotten medical bills
• Furniture Payments

New Construction Loan Process Step Two: Prequalifying

1) Ask any loan officer, Realtor or home builder to prequalify you for a loan. This process will generally involve calculating approximately 35% of your income, minus any other loan payments you may owe. This is the amount you will be able to make in a mortgage payment, and therefore it determines how much you can borrow.

2) Always be truthful with people who are prequalifying you. There is no point in attempting to either hide income or over inflate your projected income. Just tell them the truth so that they can help you get the best loan for your situation.

3) The professional helping you pre-qualify will use an amortization table or a mortgage calculator to figure out how much you can borrow at the current interest rates, and make a payment of one third of your income.

4) The next step is to pre-qualify yourself. While the loan company will not let you plan to make payments of one third of your income, they will certainly allow you to borrow less than that. It is up to you to decide how difficult it will be to make those payments over various circumstances over the next 15 or 30 years.

5) Consider how much you would pre-qualify for on a 15 year loan. Find out how much interest you would save over the course of a loan with a 15 year loan.

New Construction Loan Process Step Three: Applying for a Loan

1) Your homebuilder will play an important role in the new construction loan process. They will have to present a number of documents, including a house plan, a materials list and other items which may vary by state, and lending institution.
2) Since he must go to the bank anyway, find out if they will accompany you to the loan office.

3) Various lending institution personnel, will be assisting you in selecting a loan, and explaining how to fill out the forms. Your home builder or a realtor can also be of assistance if you have more questions.

4) Always be truthful on your loan application. Check and re-check your records to insure that your information is accurate and matches what you reported on your tax return. It is vital that you are honest and that your numbers match with your tax return or your loan will be denied, and you could even get into trouble with the IRS. You will not succeed in deceiving the loan company.

5) Once you’ve filled out the paper work, you must wait for a reply. The time it takes to find out about your application will take several weeks in most cases. Times vary though.

The new construction loan process can be complicated, but if you are well prepared, honest with your loan officer and home builder, and make sure the information on your loan application is true and matches your tax return, then you will get the loan. The new construction loan process is simple with the help of your home builder, and loan officers helping you through the process.

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