Bad Credit Does Not Disqualify You From A Construction Loan

Is a construction loan your ticket to building your dream home? […]

Bad Credit Does Not Disqualify You From A Construction Loan

Posted on: August 24, 2018

Tags: , , , , , ,

Is a construction loan your ticket to building your dream home? Maybe you are second-guessing yourself because your credit history is not as pristine as others. Or maybe, you have filed for bankruptcy and you feel that it is impossible for you to get back up on your credit rating. Your financial history may not be creditworthy anymore but you can still get a construction loan even if you suffered financial difficulties in the past. Construction loans can be challenging to apply even if you have a good credit standing, how much more if you tarnished your credit history. Lending companies tend to make it a bit harder to approve construction loans because there is still no house to use as collateral for the loan. Per experience, builders and lenders know that more often than not, the budget goes beyond the initial amount that is being estimated. Imagine if you are a lender and the house that the construction of the house that is being built is stopped in the middle of the project, how then will you dispose of that property? How can you recoup your investment when the borrower can’t make good of his construction loan? That is the possible reality for people of good credit standing, now how much more if the borrower has a history of bad debts? But all is not lost. There is still hope for people who made wrong financial choices in the past and was not able to maintain a good credit standing. Credit improvement The most rational thing to do is to start cleaning up your act and improve your credit standing. The bills you expect to come monthly, make sure you pay them on time. If you have credit card bills that you need to settle, do not just pay the minimum. Regularly get a copy of your credit report and double-check if there are errors that you need to correct which may affect your credit score. The bigger down payment the better Do not just go for the smallest amount that you can come up with when it comes to down payments. If you can prove to the lender that you have been saving up money so that you can give a huge chunk for downpayment, chances are, they will look favorably upon you. If the requirement is to put down a 20% down payment on the loan you plan to take, then, if possible, go beyond that amount. FINANCING ELIGIBILITY Financing options: FHA, Conventional, USDA, and VA FHA: 3.5% down-payment  Conventional 5% down-payment  USDA: Zero down-payment  VA: Zero down-payment As with any other loan application, make sure that you shop around and prepare all the papers you need when you apply. Construction loans may be a bit more challenging to apply for given your circumstances, but it is not a dream that cannot be realized.  

Let's Start Your American Dream Loan.
Talk to a Mortgage Expert!

Contact Us