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What is a Construction Loan?

When you were a kid, you’ve probably experienced drawing your dream home on a piece of paper at school or at home when you were bored. With a construction loan, you may be able to turn these drawings into a real home where you and your family can live! Borrowers normally avail of a construction loan to fund the development of a home from the ground up.

In here, we’ll help you decide if applying for a construction loan is worth the risk and how you can have an easier time during the application process.

What is a Construction Loan?

When you were a kid, you’ve probably experienced drawing your dream home on a piece of paper at school or at home when you were bored. With a construction loan, you may be able to turn these drawings into a real home where you and your family can live! Borrowers normally avail of a construction loan to fund the development of a home from the ground up.

In here, we’ll help you decide if applying for a construction loan is worth the risk and how you can have an easier time during the application process.

SUPER SIMPLE

Transfer the Property Title

First things first, make sure that the title is already under your name. Banks will require that the property title is already under the primary borrower’s name, otherwise, they will automatically decline your application.

1

Hire a Construction Company

You need to work with a team that you trust as the construction of your home, as well as the preparation for it, depends on this. Make sure that the company that you will hire has been vetted properly. Check their business registration, past projects, and reviews.

2

Get a Floor Plan

A floor plan, usually created with the help of an architect or construction company, is a scaled drawing that showcases your desired layout for your build.

3

Get a Bill of Materials

Your hired construction company can usually provide you with a Bill of Materials (BoM). It is a detailed list of all of the necessary raw materials or components along with the labor cost that you would need to construct your dream home.

4

Book a Consultation Call with Nook

Nook’s Home Loan Consultants are equipped with the right expertise and knowledge so they can help you pick which bank suits your current situation best.

5

SUPER SIMPLE

Transfer the Property Title

First things first, make sure that the title is already under your name. Banks will require that the property title is already under the primary borrower’s name, otherwise, they will automatically decline your application.

1

Hire a Construction Company

You need to work with a team that you trust as the construction of your home, as well as the preparation for it, depends on this. Make sure that the company that you will hire has been vetted properly. Check their business registration, past projects, and reviews.

2

Get a Floor Plan

A floor plan, usually created with the help of an architect or construction company, is a scaled drawing that showcases your desired layout for your build.

3

Get a Bill of Materials

Your hired construction company can usually provide you with a Bill of Materials (BoM). It is a detailed list of all of the necessary raw materials or components along with the labor cost that you would need to construct your dream home.

4

Book a Consultation Call with Nook

Nook’s Home Loan Consultants are equipped with the right expertise and knowledge so they can help you pick which bank suits your current situation best.

5

START BUILDING NOW

How Can I Apply for a Construction Loan?

You can either wait in line at the bank and apply for a construction loan by yourself or ask Nook for help!

Applying for a construction loan involves compiling and filling up a number of documents that can understandably overwhelm any borrower. With Nook, we take charge of the entire application process for you while you wait for updates in the comfort of your home. Additionally, Nook’s home loan experts will guarantee that you get the best construction loan that fits your specific circumstances and needs. The best part is, all of Nook’s services are 100% free for all clients!

To check if you qualify for a construction loan, click now the button below!

START BUILDING NOW

How Can I Apply for a Construction Loan?

You can either wait in line at the bank and apply for a construction loan by yourself or ask Nook for help!

Applying for a construction loan involves compiling and filling up a number of documents that can understandably overwhelm any borrower. With Nook, we take charge of the entire application process for you while you wait for updates in the comfort of your home. Additionally, Nook’s home loan experts will guarantee that you get the best construction loan that fits your specific circumstances and needs. The best part is, all of Nook’s services are 100% free for all clients!

To check if you qualify for a construction loan, click now the button below!

3-Minute Pre-Qualification Tool

What Are the Requirements for Construction Loan?

Every bank has their own unique set of requirements but all borrowers must submit the documents below:

These are the following:
Housing loan application form (completely filled out)
Government Issued IDs
Marriage Certificate (if married) / Certificate of No Marriage (if not married)
Income documents (Certificate of Employment, Income Tax Returns, etc. )
Collateral documents such as Building Plan, Bill of Materials/Construction Cost Estimates, Job Specification

What are the Requirements for Construction Loan?

Every bank has their own unique set of requirements but all borrowers must submit the documents below:

These are the following:
Housing loan application form (completely filled out)
Government Issued IDs
Marriage Certificate (if married) / Certificate of No Marriage (if not married)
Income documents (Certificate of Employment, Income Tax Returns, etc. )
Collateral documents such as Building Plan, Bill of Materials/Construction Cost Estimates, Job Specification

KNOW THE PERFECT TIME

When’s the Right Time to Apply for a Construction Loan?

Applying for a construction loan is fairly simple, especially with the help of Nook and our Home Loan Consultants. What you need to know, however, is when the right time to apply for a home loan is. Below are some tips that you can use to find out when the right time is for you.

KNOW THE PERFECT TIME

When’s the Right Time to Apply for a Construction Loan?

Applying for a construction loan is fairly simple, especially with the help of Nook and our Home Loan Consultants. What you need to know, however, is when the right time to apply for a home loan is. Below are some tips that you can use to find out when the right time is for you.

When your finances are in order

Construction loan funds are released in tranche. This means that the bank will not provide the full amount in one go, so you have to make sure that you have some cushion to fund the first part of the construction.

When you have the property title, BoM, and Floor Plan

These are all essential documents that you need to begin your home loan application. Once you have these, your home loan consultant can already start your application.

When you’ve already hired a contractor or construction company that you trust

This is extremely important, especially if you plan on making this your dream property. Don’t just go for friends or family, do make sure that they have the right business registrations, as well as coverage for their workers to avoid any incidentals. Capable contractors and construction professionals also know how to apply for permits that are necessary to begin your construction.

When you know the value of the property relative to the bank

While the bank will appraise your property, in this case, vacant lot, separately, it is important to know just how much your property costs even before that. This is so you can assess how much you can actually get from the bank as a first release. As your vacant lot will serve as your collateral, the first fund release will actually be equivalent to 80% of the total appraised value of the property. If this cost is enough to cover the costs listed in the BoM, you can finish the construction period faster.

When you’ve already been pre-qualified

Not all banks can offer you a construction loan, so it is important to get pre-qualified to make sure that at least one bank can provide you funding for your dream home. Here at Nook, our Home Loan Consultants will work with you to make sure that you get the best possible deal for your desired build.

GET MORE OUT OF YOUR LOAN

Benefits of Construction Loan

Space for Creativity

Unlike a property acquisition loan, a construction loan lets you have the freedom to design your home from scratch. With a construction loan, you won’t have to settle on a pre-built home that only vaguely meets your expectations. This funding will allow you to really create a space that meets your needs and wants.

Security of Plans

Because of the nature of a construction loan, banks will take a closer inspection of your plans. From a detailed project timeline to the budget and even the design of your home, nothing will go unchecked by the bank! On the surface, this may seem like an additional hassle, but this also means you’re getting an extra layer of security for your plans. In other words, if the banks have no issues with your plans, you can be assured that you’re in the right direction.

Flexible Loan Terms

The loan term for a construction loan will be based on the project’s necessities. As such, compared to a property acquisition loan, construction loans give borrowers more control and flexibility.

You can Refinance

Construction loan usually have a higher interest rate, however, once all tranches have been released and your fixing term is done, you can actually go to another bank to take advantage of their refinancing loan rates.

GET MORE OUT OF YOUR LOAN

Benefits of Construction Loan

Space for Creativity

Unlike a property acquisition loan, a construction loan lets you have the freedom to design your home from scratch. With a construction loan, you won’t have to settle on a pre-built home that only vaguely meets your expectations. This funding will allow you to really create a space that meets your needs and wants.

Security of Plans

Because of the nature of a construction loan, banks will take a closer inspection of your plans. From a detailed project timeline to the budget and even the design of your home, nothing will go unchecked by the bank! On the surface, this may seem like an additional hassle, but this also means you’re getting an extra layer of security for your plans. In other words, if the banks have no issues with your plans, you can be assured that you’re in the right direction.

Flexible Loan Terms

The loan term for a construction loan will be based on the project’s necessities. As such, compared to a property acquisition loan, construction loans give borrowers more control and flexibility.

You Can Refinance

Construction loan usually have a higher interest rate, however, once all tranches have been released and your fixing term is done, you can actually go to another bank to take advantage of their refinancing loan rates.

TAKE NOTE OF THESE

TAKE NOTE OF THESE

Disadvantages of Construction Loan

1. More Documents

Given the flexibility of construction loan terms, banks may require more documents from borrowers compared to traditional loans. As such, planning and sorting out all necessary documents in advance is highly encouraged before availing of a construction loan!

1. More Documents

Given the flexibility of construction loan terms, banks may require more documents from borrowers compared to traditional loans. As such, planning and sorting out all necessary documents in advance is highly encouraged before availing of a construction loan!

2. Higher Interest Rates

Construction loans often have higher interest rates than ordinary mortgage loans due to their perceived risk.

2. Higher Interest Rates

Construction loans often have higher interest rates than ordinary mortgage loans due to their perceived risk.

KNOW THE BENEFITS

Is it worth it to apply for a Construction Loan?

If what you truly want is a home that’s made just for you, this is the right fit for you! If you want a house that is not the same as everybody else’s, this is the right fit for you! If you want a space that you designed yourself, from start to finish, this is the right fit for you!

Here in the Philippines where most parents hand over property titles to their children, this would totally be the best way to build a home that you can truly call your own.

With a new build, you are also free to add areas and specifics that will add value to the property, so in case you find yourself selling it in the future, you would be making a significant revenue.

KNOW THE BENEFITS

Is It Worth It to Apply for a Construction Loan?

If what you truly want is a home that’s made just for you, this is the right fit for you! If you want a house that is not the same as everybody else’s, this is the right fit for you! If you want a space that you designed yourself, from start to finish, this is the right fit for you!

Here in the Philippines where most parents hand over property titles to their children, this would totally be the best way to build a home that you can truly call your own.

With a new build, you are also free to add areas and specifics that will add value to the property, so in case you find yourself selling it in the future, you would be making a significant revenue.

How can you start with your Construction Loan?

Getting a construction loan, much like any other loan, would require that the borrower have a good credit standing, decent debt-to-income ratio or DTI, and supplementary documents that can prove that they are able to pay the bank in time.

While banks usually prefer clients with a steady source of income, Nook has also gotten freelancers approved for a construction loan in the past, provided that they submit some documents that would prove that they have sufficient funds or monthly income.

How Can You Start with Your Construction Loan?

Getting a construction loan, much like any other loan, would require that the borrower have a good credit standing, decent debt-to-income ratio or DTI, and supplementary documents that can prove that they are able to pay the bank in time.

While banks usually prefer clients with a steady source of income, Nook has also gotten freelancers approved for a construction loan in the past, provided that they submit some documents that would prove that they have sufficient funds or monthly income.

What to do during the Construction period?

The best thing to do during the construction of your dream home is to monitor the percentage done daily. Banks would usually require that about 30% has been done for them to release the next tranche, so if you want to get it in the soonest possible time, coordinating with your contractor or construction company is necessary.

It is also very important to keep percentage records. Your construction company will have this information and how to go about it. To get the next tranche released, the bank will send someone to your property to see its progress. They have to see what has been erected already and what materials were used.

To learn more about the specifics of construction loans, schedule a free consultation with our friendly home loan experts today.

What To Do During the Construction Period?

The best thing to do during the construction of your dream home is to monitor the percentage done daily. Banks would usually require that about 30% has been done for them to release the next tranche, so if you want to get it in the soonest possible time, coordinating with your contractor or construction company is necessary.

It is also very important to keep percentage records. Your construction company will have this information and how to go about it. To get the next tranche released, the bank will send someone to your property to see its progress. They have to see what has been erected already and what materials were used.

To learn more about the specifics of construction loans, schedule a free consultation with our friendly home loan experts today.

MORE FROM YOUR LOAN

Apply for Both Acquisition and Construction Loan at the Same Time

MORE FROM YOUR LOAN

Apply for Both Acquisition and Construction Loan at the Same Time

In some cases, clients who would like to purchase a vacant lot would require the assistance of the bank to also construct their dream home. This is also possible with the help of Nook.

As you will also have to buy the lot, you are therefore required to have sufficient funds to pay at least 20% of the purchase price as the bank can only release 80% of the total appraised value. This means that if you are planning to buy a vacant lot worth 1,000,000, once you get approved for the acquisition loan, you would have to shell out 200,000 out of pocket to complete the purchase.

Additionally, the seller of the lot will have to immediately transfer the title of the property to you, otherwise, the bank won’t release the funds to you as the home loan borrower.

If you would like to get more information on this type of loan, our Home Loan Consultants can jump right in and assist you. Contact us now through this link or try doing a pre-qualification now from the button below.

In some cases, clients who would like to purchase a vacant lot would require the assistance of the bank to also construct their dream home. This is also possible with the help of Nook.

As you will also have to buy the lot, you are therefore required to have sufficient funds to pay at least 20% of the purchase price as the bank can only release 80% of the total appraised value. This means that if you are planning to buy a vacant lot worth 1,000,000, once you get approved for the acquisition loan, you would have to shell out 200,000 out of pocket to complete the purchase.

Additionally, the seller of the lot will have to immediately transfer the title of the property to you, otherwise, the bank won’t release the funds to you as the home loan borrower.

If you would like to get more information on this type of loan, our Home Loan Consultants can jump right in and assist you. Contact us now through this link or try doing a pre-qualification now from the button below.

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Welcome to the future of loans

Get Pre-Qualified

Create an Account

We’re Making Loans Simple

Company

Support

Auto Loans

Home Loan

Personal Loan

© 2024 Nook. All rights reserved

Terms | Privacy