How To Become A Construction Loan Broker
What Is A Construction Loan?
A construction loan is a loan given by a lender to a borrower to finance the building of a new property, often a custom-designed property. This type of loan differs from a standard mortgage loan in that the lender must know the complete "story" involving the planned construction before it would be willing to finance the borrower.
How Are Construction Loans Paid?
Construction loans are usually paid out according to the number of stages in the building of a property. A borrower will usually receive from five to ten draws. For instance, the first stage would be to pour the foundation for the property and so the first draw will be given to the borrower to complete this stage. The next stage might be to frame the property and so the next draw will be given to the borrower to complete this stage. Following this stage, heating and cooling systems, wiring, and plumbing systems will need to be installed, and then in the next stage, cabinets, flooring and fixtures will need to be installed, with the final stage consisting of finishing work (painting, carpeting, etc.). Each of these remaining stages will require a draw of the construction loan from the lender.
What Types Of Construction Loans Are There?
There are two types of construction loans: (1) A constructing-only loan, and (2) A constructing-to-permanent loan. The first type of loan is when a borrower takes out a loan only to finance the building of a property. This makes a building-only loan a short-term loan. Once the building of the property is completed, the borrower then either converts or replaces the construction-only loan with a standard mortgage. This gives the borrower the option to either find another lender and/or look for a lower rate once the property is occupied. In contrast to the building or construction-only loan, a construction-to-permanent loan is when the borrower's loan is converted to a standard loan by the same lender once the borrower has a certificate of occupancy. The advantage of this type of loan is that the borrower need only complete one mortgage application and need only to close once. It is at the time of closing when the type of mortgage the loan is converted to is decided upon. Therefore, this type of loan saves time and money for the borrower.
What Is A Construction Loan Broker?
A construction loan broker arranges loans between an individual, individuals, or company that plan to build a property and an individual, individuals, or company that is willing to finance the project.
How Can I Become A Construction Loan Broker?
As a construction loan broker, you can potentially earn a six-figure income. With our high-income loan broker program which uses easy-to-follow instruction manuals, it takes about 10 days to get started in the business.
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