How to Get Prequalified for a Home Construction Loan

Prequalification gives you an idea of what you can afford.

Before you invest in blueprints, pick a home site and contact contractors to begin the process of constructing a new home, you need to know the maximum loan amount you can afford. While obtaining approval for a home construction loan involves a lengthy application, a detailed list of construction costs and a considerable amount of time, getting prequalified proves less labor-intensive. With a few key pieces of information, a lender can quickly determine the amount he can loan you for a home construction loan, barring any unforeseen circumstances. Once you achieve prequalification, you can begin making your home construction plans with confidence.

Things You'll Need

• Copies of W-2s and tax returns
• List of assets and liabilities

Instructions

1. Gather copies of your W-2s or tax returns for the past two tax years. If married, include your spouse's W-2s. This serves as proof of income for the lender.

2. Make a list of your recurring debts and monthly payment amounts, including loan and credit card payments. This serves as proof of the amount of money you owe consistently each month.

3. Make a list of your assets and their values. List things such as bank accounts, vehicles, boats, campers, stocks, bonds, annuities, mutual funds, cash and any other assets you possess.

4. Give the lender all of the information you gathered--income, liabilities and assets--so that he can prequalify you for a home construction loan. The lender may ask you how much money you have for a down payment during the prequalification process.

Tips & Warnings

• If you receive additional income that isn't reflected on your pay stub, W-2s or tax returns, inform the lender of the source and amount.

• Shop different lenders to find the best rates and home construction loan offers. Not every lender's offer is competitive.

References

• "How to be Your Own Contractor"; Tanya Davis; 2008
• Branch Banking and Trust Company: Buying a Home -- From Prequalification to Closing
• OwnerBuilder.com: Critical Thinking About a Construction Loan