It’s a fact! Construction loans in Massachusetts are an effective, cost-efficient, and popular way to reduce the money crunch of building a new property, making major renovations, or developing new rental units.
Unlike mortgage loans, construction loans in Massachusetts are short-term financing agreements that provide borrowers with upfront cash to buy land, build on the land, or make significant additions to an existing property. One of the many upsides of construction loans in Massachusetts is that they do not penalize borrowers for early loan repayment. Construction loans only charge interest on the amount used during construction.
But, when it comes to construction loans in Massachusetts, experts agree and caution that getting a construction loan requires much thought, research, prep work, and homework to avoid making common mistakes when applying for or signing for a construction loan.
Making mistakes about construction loans can trigger all sorts of problems, including jeopardizing the all-important, construction loan approval.
Before applying for a construction loan in Massachusetts, it is a big mistake not to have finances in order. Sudden and last-minute changes to the financial status before loan closing translates into adding more debt to the key debt-to-income ratio. Last-minute changes to credit are a big mistake. An under-par credit score can trigger problems and should be improved before applying for a loan.
Also, a history of missed payments, late payments, and similar negatives can also be mistaken when it comes to getting a construction loan in Massachusetts.
A common mistake, when applying for construction loans in Massachusetts, is not understanding that interest rates on a construction loan vary, usually moving up and down with the prime rate. Expect to pay a higher interest rate on a construction loan than on a traditional mortgage. But the construction loan itself is short, usually for one year or the time required to build the new project.
Before signing on to a construction loan, careful research is important. Make sure the construction project is a workable, sound investment. A much too common mistake with construction loans in Massachusetts is being unprepared. Relying on word-of-mouth references and not doing adequate research about specific circumstances and situations can be a big mistake.
Smart borrowers do whatever it takes to have financial documentation well organized, long before applying for a construction loan. A borrower who approaches a lender with a detailed and complete (no loose ends) loan package, shows confidence and maximizes success in the construction loans in Massachusetts application process. Visit our website to know more details.