Borrowers · Texas construction loans
The approval process
The approval of any type of mortgage can be tedious. Knowing the process, who is involved and why, and what documents are needed from each party can help you prepare for a stress-free financing experience.
- 01
Land
It is not necessary for the borrower to already own the land. The transaction can be based on a land purchase, a land loan payoff, or land the borrower already owns free and clear. Any equity in the land will be applied toward any required deposit.
- 02
Cost
If you are unsure of the size and style of home you want to build, online research provides many sites with sample floor plans. Once the type of home you want is narrowed down, it is time to start interviewing builders to obtain cost estimates.
- 03
Application
Now that you know the total cost of the home (land + build), it is time to complete an application for pre-approval. Upon receipt your credit report will be pulled and your financial stability will be assessed. Credit reports are good for 90 days.
- 04
Processing
You will be asked to send documentation to support the information provided on the loan application. Documents will be gathered from both the borrower and the builder. These documents support the proposed-construction appraisal and title work.
- 05
Underwriting
Once all documents are obtained, the loan file is submitted to underwriting for approval review. It is the underwriter’s job to analyze all aspects of the loan file. Most likely the underwriter will request additional documentation for the approval.
- 06
Closing
Congratulations, you made it! When the underwriter provides the Clear-to-Close, it is time to sign the legal documents with the title company. All borrowers, co-borrowers, co-signers, non-purchasing spouses, and the builder must sign.
- 07
Construction
It’s time to break ground! The builder should proceed with obtaining insurance, permits, and so on. Construction will commence, and for the next several months you will watch your dreams be built before your eyes. How draws are paid.
- 08
Refinance
When you see countertops and cabinetry being installed, you are typically about 60 days from completion. You will need to provide updated financial documentation to support the refinance into your long-term mortgage.
- 09
Relax
Kick back and relax in the new home you created! Throw a housewarming party, cook in your new kitchen, play in your new yard. You deserve it.
