“Bad Credit Construction Loans Are Available, Depending on The Nature of Your Project and The Make Up of Your Credit Profile”

One of the benefits of construction financing is that most of it is equity based, so repayment ability or debt servicing assessments are not as important as with other types of longer term mortgages.

So if you have bad credit, but the rest of the project makes sense from an equity, budgeting, builder, project management, and exit strategy perspective, a bad credit construction loan still can be arranged.

Good credit is also most important to banks and other institutional lenders. In the world of construction financing, only about 10% of construction loans come from these sources. The vast majority of construction loans are issued by private mortgage lenders.

But its also not fair to say that all private lenders don’t care about your credit. Some privates will take more of an interest in it than others. For those that do inspect your credit report, the primary thing they’re looking for is if you’re a habitual late payer and/or regularly in collections on your credit accounts. No one likes to lend money to someone who looks like they may be difficult to work with or will not honor their commitment on a timely basis.

For the privates that can see past bad credit where there are lots of lates and collections, but the construction financing deal is otherwise strong, expect the rates and fees to be higher and the lender’s patience to be lower when any issues arise.

Bad credit that has been caused by explainable events, especially ones from the not so recent past, may have no bearing at all on a private lender’s decision to fund the project or not. The key is to thoroughly understand exactly what is being reported on your credit report, not just your credit score. If you can effectively explain any and all negatives, or provide supporting documentation to so items reported in error, then you stand a good chance to be seriously considered for any bad credit construction loans you may apply for.

If you’ve got a credit score under 650 and need a construction loan, give me a call so we can review your requirements and your credit profile and see what private mortgage financing options may be available to you.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Bad Credit Construction Loans first appeared on Ontario Construction Loans And Mortgage Financing.

“How To Secure a Construction Loan With Bad Credit”

First of all, construction financing is more based on equity in a property than most anything else. Of course if you want to secure a bank construction loan, everything is going to be important (equity, repayment, and credit), but when looking at private mortgage construction financing (which is what most people utilize anyway for construction), the overall fundamentals of the project are what’s most important.

Bad credit is also very relative. If you have a low credit score, there can be numerous reasons and circumstances as to what caused it. Some private lenders will want to understand the story, some won’t even look at your credit at all.

The more severe your credit is, there is the likelihood that it could even impact private lender interest in your construction project, but certainly doesn’t mean that private mortgage financing can’t be arranged.

The keys to any construction loan application is the value of the existing property where construction will take place, the projected market value and market interest of the completed project, the equity the borrower or builder is putting into the project, the track record of the builder, and the exit strategy for paying out the private lender at the end of the construction period.

If the exit strategy is to sell the property and the buyer has already committed, then issues around personal credit may not have any bearing on the project. If the borrower or builder will need to secure a long term mortgage to pay out the private lender at the end of the project, then its far more likely that bad credit will enter into the decision making process and could cause even a private lender source to decline your request for financing.

Bottom line for bad credit construction loans is that as long as the borrower can protect the interests of the private mortgage lender during construction and through a well defined exit strategy, then construction financing can likely be secured.

The probability of securing a construction mortgage if you have bad credit will also increase when you’re working on a project in demand in a highly active real estate market where the potential risk of loss or long resale is very low.

If you need a bad credit construction loan, give me a call so I can quickly assess your situation and provide relevant construction loan options for your review and consideration.

Click Here To Speak With Construction Mortgage Broker Joe Walsh

The post Bad Credit Construction Loans first appeared on Ontario Construction Loans And Mortgage Financing.