A bad credit construction mortgage is only going to be available through a private lending source as institutional lenders will all have some sort of minimum credit test that won’t get passed in situations where bad credit exists.
The more severe the credit, the higher the cost of financing and the tougher the draw requirements are going to be as lenders move to protect themselves from any type of loss scenario.
If the applicants credit is one of habitual late payments and debt write offs over an extended period of time with no change in the credit management practices in the near term, there may not be any one prepared to finance the project as this would speak to a difficult lending scenario and regardless of how high the rate to return may be for the lender, the opportunity may be viewed as too large a potential headache.
Individuals and businesses can have bad credit for a number of reasons that won’t preclude them from getting a bad credit construction loan either. For private lenders that don’t overly focus on the credit profile, the keys to providing a construction loan approval is going to be the amount of equity invested in the deal, the strength of the building plan as it relates to the property’s market place, and the exit strategy that will repay the construction mortgage at the end of the project. For self build situations, the private lender may want to see the take out mortgage arranged prior to construction to make sure that there will be no issue with the borrower being able to secure a long term mortgage.
As long as construction project makes good fundamental sense, there is likely going to be construction financing options available to the borrower. If a private lender can feel comfortable that the risk of loss is adequately covered off, the bad credit position of the borrower in itself is not likely going to decline the application. And if it becomes difficult to secure preferred rates and terms, the borrower may have to consider putting more cash into the initial construction to reduce the risk to the lender.
If you need a bad credit construction mortgage for a project you’re planning or in the middle of, I suggest that you give me a call so we can quickly go over your financing requirements together and review potential construction financing options.