Getting a loan is a serious decision, especially if it’s about buying or building your own home. However, if we take a loan to build a house, we can count on the fact that all formalities – from submitting the application, through the financial verification of the borrower, technical verification of the property, to signing the contract and paying out the loan – will close in about 4 weeks, in the case of a loan for the construction of a house we have to reckon with the fact that it will take more time.
Submission of a loan to a house for building a house
The loan for building a house is more complicated on the formal side, mainly due to the documentation we are required to provide to the bank. When applying for a loan, remember that the bank will not agree to finance construction if you are not yet the owner of a construction plot on which you want to build a house. The plot may be treated by the bank as its own contribution.
The next step is to complete the documentation needed to submit the application. In most banks, the list of documents is as follows:
– copy of ID. Some banks may also require a second identity document (e.g. driving license or passport);
– a document confirming the source and amount of income received. Most often it is an employment certificate completed by the employer on a special, bank print (such certificate is valid for one month, after its expiry the bank requires the certificate to be reissued);
– if you run your own business, you will need documents confirming the company’s income,for the previous year, as well as company data;
– plot and construction documents – current excerpt from the land and mortgage register, notarial deed of purchase of the plot or other document confirming ownership, current excerpt from the land register, decision on building and land development conditions, decision on building permit, journal and construction project.
After completing all the necessary documents and completing the applications and cost estimate (in which we include the estimated costs of performing all construction works and the deadline for their completion), we must wait for the bank’s decision. The deadline for obtaining a decision may be different, however, by statute, it cannot last longer than 21 days.
Loan payment and settlement
The loan for the construction of the house is paid out in tranches, i.e. the bank divides the entire loan into parts, in line with the items we include in the cost estimate. Money from the tranche must be used for the works indicated in it. After using the amount of the tranche, we turn to the bank to settle it and apply for the next one to be paid out. Then the bank sends an appraiser who checks whether the money from the previous tranche was actually spent in accordance with the cost estimate.
The final stage of settlement of the entire loan is the acceptance of the building and the issuance of the occupancy permit by the building supervision inspector.