Compile relevant personal and business financial documents
2
Complete the loan application form
3
Submit the completed application with the relevant documents to the lender
4
Prepare builder and project information including builder contract and project specs
5
Approval: Loan Officer for preliminary check
6
Wait for completion of the lender's underwriting process
7
Obtain a Conditional Loan Approval
8
Address any conditions on the Loan Approval
9
Get a Builder's Risk insurance policy
10
Obtain Title Insurance
11
Complete the loan closing process with the lender
12
Establish a Construction Draw Schedule
13
Arrange for periodic inspections by the lender
14
Maintain all necessary permits and comply with local building codes
15
Submit draw requests as construction progresses
16
Approval: Lender for each draw request
17
Ensure all subcontractors are paid and no liens are filed
18
Submit final draw and obtain Certificate of Occupancy
19
Convert the construction loan into a permanent mortgage after completion of the project
Compile relevant personal and business financial documents
Gather all necessary personal and business financial documents that will be required for the loan application. This includes documents such as bank statements, tax returns, credit reports, and financial statements. These documents will provide the lender with the necessary information to assess your financial situation and determine your eligibility for the loan. Make sure to organize the documents in a clear and easy-to-access manner to streamline the application process.
Complete the loan application form
Fill out the loan application form with accurate and up-to-date information. This form is a crucial step in the loan process as it provides the lender with the necessary details about the borrower, their financial situation, and the purpose of the loan.
1
Construction
2
Home purchase
3
Refinance
4
Renovation
1
$100,000 - $500,000
2
$500,000 - $1,000,000
3
$1,000,000 - $5,000,000
4
$5,000,000 - $10,000,000
5
Over $10,000,000
Submit the completed application with the relevant documents to the lender
Submit the completed loan application along with all the required financial and supporting documents to the lender. Ensure that all documents are organized, complete, and legible to facilitate the lender's review process. This step marks the official submission of the loan application for further processing.
Loan Application Submission
Prepare builder and project information including builder contract and project specs
Gather and organize all necessary documents related to the builder and the construction project. This includes the builder contract, project specifications, architectural plans, permits, and any other relevant information. These documents provide crucial details about the project and ensure transparency between the lender, borrower, and builder.
Approval: Loan Officer for preliminary check
Will be submitted for approval:
Compile relevant personal and business financial documents
Will be submitted
Complete the loan application form
Will be submitted
Submit the completed application with the relevant documents to the lender
Will be submitted
Wait for completion of the lender's underwriting process
Allow the lender to review and evaluate the loan application, supporting documents, and borrower's financial information. The underwriting process involves assessing the borrower's creditworthiness, verifying information, and ensuring compliance with lending regulations. This step may take some time, and the borrower should be prepared to provide additional information or address any concerns raised by the lender.
Obtain a Conditional Loan Approval
Receive a conditional approval for the loan based on the lender's initial evaluation. The Conditional Loan Approval outlines the terms, conditions, and requirements that must be met for the loan to be finalized. This approval indicates the lender's willingness to proceed with the loan, pending the fulfillment of specified conditions.
1
Fixed rate
2
Adjustable rate
1
10
2
15
3
20
4
25
5
30
Address any conditions on the Loan Approval
Ensure that all conditions specified in the Conditional Loan Approval are met. These conditions may include providing additional documentation, clarifying information, or fulfilling certain requirements before the loan can proceed. It is important to address these conditions in a timely manner to maintain the loan's progress and avoid any delays in the construction process.
1
Not started
2
In progress
3
Completed
Get a Builder's Risk insurance policy
Obtain a Builder's Risk insurance policy to protect the construction project and parties involved from potential risks and damages during the construction phase. This insurance policy provides coverage for property damage, theft, and liability issues. The policy should be obtained before starting the construction to ensure adequate protection throughout the project.
Obtain Title Insurance
Acquire Title Insurance to protect against any potential title issues or claims during the construction and after the project's completion. The Title Insurance ensures that the lender and buyer have a clear title to the property, free from any encumbrances or disputes. It provides peace of mind to all parties involved in the construction loan process.
Complete the loan closing process with the lender
Finalize the loan closing process by reviewing and signing the loan documents. This step involves carefully reading and understanding the terms, conditions, and obligations outlined in the loan agreement. Ensure that all necessary signatures are obtained and all required payments are made before proceeding with the construction loan.
Establish a Construction Draw Schedule
Create a construction draw schedule that outlines the disbursement of funds at various stages of the project. This schedule should align with the construction timeline and milestones. The Construction Draw Schedule ensures timely payments to the builder based on completed work, helping maintain project progress and cash flow management.
1
Not started
2
In progress
3
Completed
Arrange for periodic inspections by the lender
Schedule and coordinate regular inspections with the lender throughout the construction process. These inspections ensure that the project is progressing as planned, adhering to the specifications, and meeting the lender's requirements. The lender's inspections provide an additional layer of oversight and help identify any potential issues or deviations from the approved plans.
1
Scheduled
2
Completed
3
Pending
4
Approved
Maintain all necessary permits and comply with local building codes
Ensure compliance with all necessary permits and local building codes throughout the construction process. This includes obtaining building permits, inspections, and any other permissions required by local authorities. Compliance with regulations helps maintain project legality, safety, and avoids potential penalties or delays in the construction loan process.
Submit draw requests as construction progresses
Submit draw requests to the lender based on the construction draw schedule and completed project milestones. These draw requests provide documentation and justification for requesting funds for the construction project. Ensure that each draw request is supported by adequate evidence of completed work.
1
Pending
2
Approved
3
Rejected
Approval: Lender for each draw request
Will be submitted for approval:
Establish a Construction Draw Schedule
Will be submitted
Arrange for periodic inspections by the lender
Will be submitted
Submit draw requests as construction progresses
Will be submitted
Ensure all subcontractors are paid and no liens are filed
Ensure timely and accurate payments to subcontractors involved in the construction project. Avoid any delays or payment issues that may lead to subcontractor liens, disputes, or legal complications. Maintaining good relationships and clear communication with subcontractors is essential to ensure a smooth construction process.
1
Not paid
2
Partially paid
3
Fully paid
Submit final draw and obtain Certificate of Occupancy
Submit the final draw request to the lender once the construction project is completed. This draw request should include all remaining payments required for the project's completion. Additionally, obtain the Certificate of Occupancy from the relevant authorities to certify that the building complies with all applicable codes and regulations and is safe for occupancy.
Convert the construction loan into a permanent mortgage after completion of the project
Transition the construction loan into a permanent mortgage once the construction project is completed. This process involves converting the short-term construction loan into a long-term mortgage that covers the cost of the construction and becomes the primary financing for the property. This step allows the borrower to secure the property and continue building equity.