Big Mistakes People Make Before Getting a Construction Loan

When you want to build a custom home, you have two options – buy a vacant lot to build your home on or buy a lot with a home you can tear down to build on. Either way, you are going to have to purchase a property, and secure a construction loan to build your house. But many people make mistakes at this stage which hamper their ability to get their custom house built efficiently and timely on a budget. Here are three big mistakes people make before getting a construction loan.

Changing Jobs

The first big mistake that people make before getting a construction loan is changing your job. When lenders look at your financial history for information to determine how creditworthy you are. When you change jobs, it can appear as though you have no current employment, which is a serious red flag for lenders looking through applications. Changing your job before building your custom home can throw some extra wrenches into the issue and can leave you with unwanted consequences, like a smaller than anticipated loan. If you are looking to build a custom house, wait to switch jobs until after you have secured all of your loans.

Taking Out a Loan

Another major mistake that people make before getting a construction loan is taking out a different loan. Your credit score is impacted by a lot of things, but your total line of credit, recent account openings, and credit inquiries can impact your score. According to Power Finances Texas, hard inquiries can cause your credit to take a hit that lasts for months. You will want the best credit for your largest loan, and so on down the list. Make sure you are starting with the largest loan, your construction loan, and then handling the rest from there, or else your credit could waver.

Not Doing Research

The final mistake that people make all the time before getting a construction loan is not doing their research. Look into the property that you want to buy, your builders, and most importantly, look at different lenders for different options. Without doing proper research, you could take a bad loan to build on a bad piece of property. Builders Capital suggests researching until there is no stone left unturned, and then you are ready to start building.

Getting a construction loan can be a nightmare in and of itself. The least you can do is avoid a major mistake that will make it harder for you. Make sure that you aren’t making these mistakes here before securing your construction loan to build your custom home.

Check out this article on important material choices to make for your home’s exterior!