The process of building a home can be stressful and complex, especially if you apply for a construction loan. Construction loans can help you fund your building project, but banks and lenders have many rules and regulations you need to follow. They also require you to provide documentation and paperwork to show project costs, payment schedules and other necessary information. What documents does your contractor need to give you so you can receive approval?
A contract
The building contract outlines some vital information that your bank needs for loan approval and payment releases. Contracts outline the construction stages, the payment schedule, the length of the project and the estimated final cost.
Plans and specifications
Plans allow your lender to understand the scope of the project you are completing. Specifications provide the bank with further information needed to complete a valuation, which will be used when determining your borrowing power. Specifications typically include the materials used, appliances installed and the quality of workmanship for finishings and fixtures.
Added work quotes
Your primary contractor will not provide estimates for projects they are not completing in your building contract. The quotes for these smaller projects will need to be provided by the applicable contractor. Some work that a different contractor or company may complete is:
- Pools
- Sheds
- Landscaping
- Retaining walls
- Power poles
- Driveways
It is essential that your contractor(s) provides all the above documentation so you can be approved for a loan amount that will cover the cost of your build. Before the first drawdown payment is released, your contractor may have to provide your lender with evidence that they have builder’s insurance.
Mortgage House is a non-bank lender. Our team of brokers specialises in all the different types of home loans. If you have questions about applying for a construction loan, we can help. We may even be able to find a construction loan with better terms than traditional lenders.
