Builder Construction Loans

People who build their dream house, generally take the help of the services of a custom homebuilder who is also a licensed general contractor. The builder is responsible for delivering a high quality finished product within budget, in a prescribed time period, and in a lien-free condition. Construction loans which is taken out by the builder is generally referred as builder construction loan. The builder would get a construction loan for 6 months, usually from a bank and set up a fund control with the bank or another supplier that is authorized to run the fund control for the bank. He or she gives an itemized account of the funds needed and per line item how they are spent. The funds are released per completion of a group of items or by percent of construction completed. The bank figures their loan on loan to value ratios, i.e. the completed product and land, improvements, etc.

Always check your builder, see homes completed, talk to previous clients, talk to his suppliers, check with the state that their license is in good standing with no complaints filed. And finally make sure your builder has insurance and even a completion bond if necessary. 

Make sure your builder's costs include all the costs of construction, loan costs etc. You yourself can take out the construction loan and monitor the loan disbursements along with your builder. You will refinance into permanent financing when the construction period is over and usually the bank will rollover most of your original costs into your new loan.

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