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When you're getting ready to build a home, you have a lot going on. It can be tempting to take a shortcut whenever necessary, especially since there is so much to do. However, when you're looking for good interest rates for construction loans in California, you should really take the time to do it right. So what do you have to do to get the best deal on your loan? Work on Your Credit Score When it's time to get a loan, your credit score is often the most important number in the whole word. Obviously, the higher your credit score, the better terms you'll get for your loan, including a good interest rate. Unfortunately, when it comes to credit score math, it seems like magic to most people. In order to get a better credit score, banks are looking for a few different things. One, they're looking for reliability. Do you always pay your bills on time? Two, banks want to make sure you're not overextending yourself. This means, you shouldn't max out your credit cards, and you should watch your debt-to-income ratio. Finally, your credit score can also be affected if you have too many new accounts. Last but not least, banks like to see a good balance of secured and unsecured debt. If you have 10 different credit card accounts and nothing else, that's bad news. On the other hand, a car loan is usually considered good debt, and so are student loans. Save for a Down Payment Improving your credit score may sound too difficult for you. And while it's not entirely out of your hands to do something about your credit score, it's much easier to save up for a down payment. You can even ask your lender of choice how much of a down payment would help you get a loan. As a general rule of thumb, most lenders require at least 20% down for a new home construction loan. Obviously, a higher down payment is better. And the best part about saving for a down payment is that you're investing in yourself. After all, this money will give you instant equity in your home while reducing the time until you're mortgage-free. Increase Your Income Banks always need to make sure that you can repay the loan. After all, they're not in the business of selling homes. They're in the money-lending business. One of the best indicators that you're able to repay them is the amount of your income. Do you make enough money to pay all of your current bills and have enough left over to pay the mortgage? Banks usually work with percentages. A bank will calculate your debt-to-income ratio, which should be less than 35% including your new mortgage. This means you should only spend 35% of your total income on all of your debt payments. And since there are two variables to this equation, you can adjust these two variables to get better results. You can either decrease your debt or increase your income in order to lower your percentage. Increasing your income is usually easier said than done. But maybe you haven't asked for a pay raise lately. Or maybe you have enough time to start a part-time business or a second job. A little extra money can go a long way to building up your down payment fund and lowering your debt and increasing your income all at the same time. Shop Around Getting the best interest rates for construction loans in California and other areas is not all about your numbers, although they play a significant role. Even though most lenders use the same criteria to evaluate your credit risk, some will offer better rates than others. So take some time and shop around! Construction Loans We have residential construction loan programs to fit almost every need and situation. Visit our page on http://constructionloans.com to see our page today!
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