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How does a New Home construction loan work?

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If you’re building your home or doing major renovations, you may be interested in getting a construction loan. Here’s a general overview of how they work and what to look for.

For some Australians, building their dream home is the ultimate goal. If this is you, you might be wondering how exactly to go about it. The answer? A construction loan!

A new home construction is loan for those who are looking to build their dream home. Instead of being like regular loan, the funds for construction loans are released in stages. While the application process can be a lot harder than applying for a regular loan, a loan broker will be able to help you with preparing everything you will need. New home construction loans work a little differently to a personal loan or a home loan, in that, you will need detailed plans and quotes in order to be approved. While this is something that your builder can help you with, it is important to be aware yourself of each aspect of the loan that you are applying for. Once the loan has been approved, you will be well on your way to starting your dream build. If you’re wondering about how hard it is to get a new home construction loan, we have broken it down for you in the article below.

Getting a new home construction loan doesn’t have to be difficult. In fact, if you know what you need to supply, a new home construction loan is quite simple. Let’s start with the basics.

How Does A New Home Construction Loan Work?

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A construction loan is a type of home loan aimed to assist those who are building from scratch. It does not with the same way as a regular home loan, as home loans can only be used to buy an existing property. A construction loan covers the costs of the building process itself.

In a construction loan, payments will not be made to you in one lump sum. Instead, your lender will usually pay you in progress payments – that is, one payment for each stage of construction. Your builder will issue an invoice at each stage of the build, which you then pass on to your lender in order for the payments to be made. You may need to have a deposit ready in order to cover the initial cost of the materials needed to begin the construction process, which your lender will decide the value of.

How Hard Is The Process Of Applying For A New Home Construction Loan?

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As we stated above, getting approval for a new home construction loan does not have to be difficult at all. In fact, if you do your research before applying, the process can be fairly straightforward.

In saying that, applying for a construction loan can be quite a strict process as essentially you’re applying to fund something that does not yet exist. Lenders will evaluate your eligibility based on a number of factors, one being your credit score.

This should not put you off though, as once you have all of your documents in order there should not be any problems with getting approval.

This is where it can be useful to retain the services of a financial broker. A broker can negotiate with lenders on your behalf so that you are not having to do all the back and forth negotiating by yourself.

Tiger Finance can assess your financial situation and give you advice on how to best move forward with your applications, while we compare rates for you with our hundreds of lenders. We will handle everything for you until your loan settles in order for you to be able to concentrate on starting your dream build.

What do you need to apply For A Construction Loan?

In addition to the usual forms of identification needed to apply for a loan, you will need a few extra documents before you begin the application process with your lender.

  • A building contract is potentially the most important document of all. It should outline every construction stage in great detail and the payment schedule for the stages of construction. It should also include a detailed timeline of the construction work and the costs of the overall build.

  • A building plan is the blueprint of your future home. It should include both the layout and dimensions of your house when it’s finished.

  • Quotes from your builder will also be necessary for your application. Your lender will need the estimated costs of the build, plus any additional costs such as swimming pools and landscaping. Lenders will usually look at these items and decide if they add extra value to your home.

  • Your lender will also need documents relating to your income and expenses, and any assets and investments that are in your name. These are fairly standard when applying for any loan. Your lender will need to make sure that you have stable employment history and income stability in order to ensure that you have the ability to repay your loan without any problems.

How Can You Make The Process Easier On Yourself?

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You can make the process easier for all involved by working with a qualified builder. It may seem obvious to begin with, but a builder that is experienced and knows what they are doing will be immensely helpful.

Not only will your builder be able to stay on top of the construction process, but they can also be an invaluable source when it comes to what to include in your quotes for your lender. An experienced builder will have been through this process many times and should be able to help you with what to expect when it comes to compiling your details.

Planning for the unexpected will also make the entire process easier. Construction projects are notorious for delays and sudden issues, and you should plan for these as best you can, both time-wise and financially. This means not planning to spend every dollar that your lender gives you, and allowing enough time for any issues to be solved.

Where Does Tiger Finance Come In?

With Tiger Finance, we can get you a loan easily. You’ll have a free consultation with one of our specialists, and we will tailor-make you a loan. We’ll negotiate with lenders on your behalf before you’re approved.

We’ve helped countless Australians with both good and bad credit ratings to get funded for their dream build. We understand that lending criteria from other lenders are too strict, and can stop you from achieving your goals. That is wrong, and it shouldn’t hold you back.

How We Can Help

Our finance specialists can help you find the right construction loan for your project. Construction finance is a complicated topic, and that’s where Tiger Finance can help. We will find a loan that makes your dream project that much easier.

If you are one of the many Australians finding getting a construction loan difficult, Tiger Finance can make the process simple and pain-free.

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