It is hard, but not at all impossible, to get a bad credit construction loan, although it does depend on your particular circumstances. Check the following list; if any of these apply to you, you will be more likely to get a construction loan even if your credit rating is not very good:
– Do you have a lot of money to put down? The bank will be more likely to lend you the money if you have a sizable down payment. You should know, however, that if you default on the loan that this money is then forfeit to the bank.
– Do you own your own home, or own property that can be put up as collateral? Having such collateral to put up for a construction loan not only assures the bank that you are serious but also gives the bank something to claim if you are unable to pay the loan back.
– If you are not getting your construction loan from your own bank, but you have had a fair amount of money in your account and have had the account a long time, bring evidence of this to the lender you are applying to. Showing that you have had a sizable amount of money going through your account on a regular basis makes it more likely that the potential lender will take you seriously and grant you the loan.
One very important thing you should always do, no matter what your credit rating is, is to get a copy of your personal credit score. There are places online that will help you get this for a small fee, or if you have a mortgage broker, you can simply ask them for it. Go over your credit report and check it for errors. Sometimes there are mistakes made and by calling in and pointing them out you can have them removed, thus boosting your credit ratings a bit.
After you have found a bank that will be willing to consider your loan application despite the fact that you have bad credit, then you will need to take the same steps as someone who has a good credit rating would take before you actually turn in the loan application:
– Ask the bank what builders they approve. You need to find a builder whether you are having your own home built or even if you are having major repairs done on your existing home. Often banks will have a list of what builders they accept and you will need to choose one from off their list if you hope to get a loan from them.
– After you have hired a builder that you know is acceptable to the bank, sit down together and go over what you want done and see exactly how much it will cost. If you are having a home built, you will need to draw up a blueprint of what the house will look like together with the cost estimation and time estimation. Builders build houses in stages; they make a list of what work they will do in what period of time. The bank then releases a set amount of the construction loan to the builder when that particular portion of the work is to start.
– With homes being built from scratch, the bank will want to know what your future plans are for the house, whether you will live in it, rent it, or sell it. The bank will not grant the loan application if you are not sure what you intend to do with the house you are building, so make sure you know what your future plans are.