A construction loan gives a homeowner the opportunity to build the house of his or her dreams. No longer is he or she relegated to cookie cutter homes in a neighborhood. Now is the time to use that paid for lot or land as equity for a construction loan to build your house. Use the equity as a down payment and avoid taking any cash out of pocket in the initial part of the process.

A construction loan is provided for a borrower to construct a house or building on property. Since a construction loan is a nonstandard loan, it is generally set up as an interest only loan and payments are required during the construction. Also, many lenders require that a borrower provide a down payment of 5 to 10 percent. If the borrower owns land, the equity may be used to secure the construction loan in lieu of a down payment. Janks Construction can help you with all of your construction needs.

Difficulty: Moderate

Things You'll Need:
Deed
Loan application
Loan documents

Instructions

1. Find a lender who offers construction loans. Generally, local banks have programs that provide construction loans, since they offer in-house financing that does not require the loan to be submitted to an outside underwriter.

2. Take a copy of the deed to the land showing you as the owner, your income statements, copies of tax documents, employment verification and equity statements from retirement accounts, such as a 401K, to a lender who offers construction loans.

3. Complete an application for a construction loan. Tell the lender that you want to use the equity in land that you own to secure the construction loan. Give the lender details, such as how long the project will take, the total estimated cost and future plans for the constructed property, such as business or residential.

4. Sign the loan documents and supply the title to the land. Use the funds provided by the construction loan to complete the project. Make the payment required on the loan while the construction is taking place.

5. Convert the construction loan to a residential mortgage after the construction is completed. Obtain a mortgage to pay off the construction loan and include the land with the new mortgage. Contact a mortgage broker to receive quotes on loan interest rates. This opens up options for a lower interest rate loan, which saves you money.

Tips:

-Ask the lender to pay the builder directly, as soon as preset requirements are met. This keeps the builder accountable and keeps you from spending the funds on other items for the home.

Warnings:

-Construction loans are charged a higher interest rate than a traditional mortgage, due to the risk to the lender. Be sure to inform the builder that the higher interest rate is not desirable and you would like to refinance to a longer-term mortgage with a lower rate. In other words, you want the house to be completed as soon as possible.

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Construction loans are used to finance the new construction of a home. Since these loans are not made on inhabitable properties, the terms are quite different than those of conventional mortgages. If you are interested in building your own home, it's important that you thoroughly research lenders and programs. In general, financing the construction of a home can be less costly that an outright purchase, if handled correctly. Janks Construction can help you with all of your construction needs.

This type of financing differs from regular purchase money or refinance home mortgages in the way the loan amount is calculated and the way it is structured.

Before calculating the loan amount, we need a basic budget.

The main components of construction loans that are included in the budget are:

1. Soft costs; consisting of architectural plans, engineering and permit fees.
2. Hard costs; which are all the actual physical costs of construction.
3. Closing costs; consisting of origination and lender fees, title, and closing fees.
4. Inspection fees.
5. Reserves; consisting of interest reserve and contingency reserve.
6. Existing lot pay off.

Basics
Most constructions loans are revolving accounts that require interest-only payments during the construction period. Most homeowners are not completely sure how much a project will cost, and will need to access the credit line for surprise expenses and over-budget problems. It is up to you and your lender how the cash advances will work, but most often the payments will be low. Rates on construction loans are often adjustable and based on the Prime Rate.

Obtaining a Construction Loan
When applying for a construction loan, it is the borrower's responsibility to paint a picture of the construction process. A prospective borrower should come to a loan meeting armed with estimates and cost projections to support their case for a construction loan. Borrowers must be able to talk intelligently, in detail, about the plans, contractors, materials, blueprints, and potential delays on a construction project. The more articulate you are about your plan, the more likely you'll be able to convince a loan officer.

Construction-Permanent Programs
Most straight construction loans come due when the project is completed. This forces borrowers to refinance their construction loans. Alternatively, there are Construction-Permanent mortgages that require only one closing. These loans have predetermined periods of time in which the construction loan will be active, after which the permanent, conventional loan will commence. It's important to leave ample time for construction, as in most cases, delays are inevitable.

Rate Locking
Another option for construction loan borrowers is a rate-lock agreement. Most brokers and lenders will lock in a rate to be charged at a future date on a future loan--usually no more than 60 days. These certificates must be obtained before construction is complete. Such agreements reduce the stress of refinancing immediately after a construction project.

Loan Amounts
A crucial component of a construction project is accurately estimating the amount of money you'll need. While it's best to overestimate--based on estimates from contractors--you do not want to end up with too much money left over. Any money that is unused should be left either on the credit line or paid back to the bank during the refinance or conversion to a permanent loan.

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Construction management is the management and technological side of both residential and commercial construction projects. Construction managers will use their management techniques and apply them to the planning, design and construction of a project in order to control the time and cost to complete the project and to oversee the quality of the construction. Janks Construction can help you with all of your construction needs.

Significant Points:

-Construction managers must be available—often 24 hours a day—to deal with delays, bad weather, or emergencies at the jobsite.

-Employers prefer individuals who combine construction industry work experience with a bachelor’s degree in construction science, construction management, or civil engineering.

-Excellent employment opportunities are expected, as the increasing complexity of many construction projects requires more managers to oversee them.

Working Conditions

Construction managers work out of a main office from which the overall construction project is monitored, or out of a field office at the construction site. Advances in telecommunications and Internet access allow construction managers to be onsite without being out of contact of the main office. Management decisions regarding daily construction activities generally are made at the jobsite. Managers may travel extensively when the construction site is not close to their main office or when they are responsible for activities at two or more sites. Management of overseas construction projects usually entails temporary residence in another country.

Construction managers may be on call—often 24 hours a day—to deal with delays, the effects of bad weather, or emergencies at the site. Most work more than a standard 40-hour week because construction may proceed around-the-clock. They may have to work this type of schedule for days, even weeks, to meet special project deadlines, especially if there are delays.

Although the work usually is not considered inherently dangerous, construction managers must be careful while performing onsite services.

Employment

Construction managers held 431,000 jobs in 2004. Over half were self-employed, many as owners of general or specialty trade construction firms. Most of the rest were employed in the construction industry, 13 percent by specialty trade contractors—for example, plumbing, heating and air-conditioning and electrical contractors—and 18 percent by general building contractors. Others were employed by architectural, engineering, and related services firms and by local governments.

Instructions

1. Determine the level of your construction management education and skills.

2. Decide if you need to go to school to get more understanding of construction management. Some jobs will require a degree to work in construction management but most will not.

3. Study for a degree at a college or university that offers classes pertaining to construction management education. This degree is in construction science and construction technologies. Depending on which college or university you attend, you can earn an associate's, a bachelor's, or a master's degree in construction management.

4. Consider getting paid while earning a degree and also gain experience by enlisting in the military.

5. Become an apprentice to a seasoned construction manager. This will also allow you to earn money while gaining valuable experience. Success comes with hard work in this field.

Tips & Warnings

-You will learn a new language that deals specifically with construction in regards to tools and actions.

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In the construction industry, a scope of work is a list of all the tasks included in a specific company's contract. For example, a scope of work for a door contractor will list all the types of doors, frames and hardware that the contractor is to provide, as well as installation, delivery and other general conditions of the work. A scope of work is prepared by general contractors and is used for both the bidding process and while writing the contracts themselves. While it takes a bit of basic construction knowledge to create an accurate scope, the task itself is not too difficult for the average project manager or assistant. Janks Construction can help you with all of your construction needs.

Difficulty: Moderate

Instructions

1. Review the drawings for the project as well as the specifications book. The only way to prepare an accurate scope of work is to know exactly what tasks are involved in the project. Make notes of any unusual items you see that you think the subcontractors may have overlooked.

2. Find an appropriate template for your scope. If your company doesn't have its own scope template, use a simple word processing document. Include your company's name and the company the scope is being issued to, as well as the name of the project and the date. You can then list each scope item individually in a numbered list.

3. Create a general scope that is applicable to all trades. There are certain tasks on a construction job that every subcontractor must complete. These may include cleanup, safety issues, project meetings, wage reports, schedules or permits. Whatever items are specific to the job or are critical to a successful project should be listed in the general scope of work. As you prepare scopes for individual trades, the general scope should be included as a separate section.

4. Prepare a scope for each trade. In the door and hardware example, you would include all the tasks the door contractor is expected to perform. This could include supplying and installing all hollow metal frames, wood doors and hardware.

5. Look for areas that are potentially overlapping between two contractors, and be sure to clarify in the scope who is responsible for what task. With doors and hardware, for example, a separate storefront contractor may provide aluminum entrances. If so, specify in each scope that will be providing the hardware for these aluminum entrances. Another potential overlap in this category is locks and hardware for cabinets and furnishings. Clarify with both trades who are to provide this hardware.

6. Include non-construction tasks that are specific to one trade. With your electrical and mechanical contractors, for example, you will want to include applicable permits for both, and you'll also want to add a scope item specifying that each is responsible for coordinating their work with the other.

7. Review the scope with each contractor to ensure all items are understood, and that the contractor is in agreement with the scope. This is usually done at a scope review meeting, which is held before a formal contract is awarded.

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When you need construction loans, bad credit can really limit your options. Loans of all kinds are becoming more difficult to obtain because the standards of lending are getting harder to meet. That doesn't necessarily mean you'll have to put your dreams on hold, but you will need to take a few steps before you apply for a construction loan. Janks Construction can help you with all of your construction needs.

Construction loans are products offered by banks and other lenders. A construction loan can be used to build your first home, build a second home while you still reside in your primary residence, or make additions or repairs to an existing home. Construction loans typically have short durations, and some are simply converted to mortgages once the construction has been completed.

As with any loan, your chances of being approved will increase if you can minimize the risk to the lender. But what if you already have a bad credit rating? Fortunately, there are plenty of ways to get the construction loan you need, regardless of your credit rating.

Having bad credit does not have to prevent borrowers from getting a construction loan. Many lenders give their clients the opportunity to get a construction loan. Using a loan of this nature can allow you to have a new house constructed, a vacation home built or even repair the home in which you are currently living. Normally, a shorter length characterizes construction loans and borrowers often decide to transition into a more permanent type mortgage after the construction has taken place. The steps below will show how a person with less than stellar credit can obtain a construction loan.

Difficulty: Moderate

Instructions

1. Find out your credit score. Go to a website on the Internet that can provide you with your personal credit score, or ask your mortgage broker for a copy of your credit report. Look over your credit report to determine if there are any errors. If you have any mistakes, contact the credit bureau directly to have them removed. Removing mistakes which appear on your report can boost your credit score.

2. Obtain a secured loan. Understand that you will have to put up your current home as a means of security. If you do not pay your construction loan lender, that lender will have the chance to foreclose on your home, and you may end up losing your personal property. Be prepared to take on that risk if you are attempting to get a secured loan. Consider using any land that you own, if you do not have a house to use as security.

3. Put down a substantial sum of money. Putting more money down will allow the lender to see that you are serious about the construction loan because you are putting your own money at risk. Realize that you can lose this money if you default on the construction loan at a later date. Remember the more money that you put down, the more seriously you will be taken by each potential lending institution.

4. Perform your due diligence. Contact any local credit unions that are in your area. Speak directly to the head of the bank where your checking account is located. Use these relationships to prove your credibility to the lender. If you have a been loyal customer at the bank, kept a certain balance each month in your accounts and have had an account at their branch for a long time, that may go a long way toward proving you are a worthy loan candidate.

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