How much do I qualify for?

How much a borrower qualifies for varies widely depending what you are looking to do, the credit score, income and monthly debts.

One item to keep in mind on construction loans is that if you plan on retaining a current property while the new one is being built or is under construction, you will need to qualify with both properties. Since the closing on a construction loan occurs before construction begins, you need to qualify with all debt at the time you close. It’s not a problem to carry two homes (it’s actually quite common), you just need to make sure you qualify with your debt ratios.

One additional note on qualifying for a construction loan is how the taxes and insurance are calculated on the new property. Because the future taxes and insurance are unknown, a rate or 1.5% – 2.0% of the end value is generally used for qualifying. This way, the lender can make sure the borrower will qualify once the higher, future taxes kick in.

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