Building a Home with Bad Credit
Many people have a dream of building their own home someday. The dream is help by people of all income levels and financial standings. Just because one has bad credit does not mean they have lost their sight of this dream of building their very own home. But, many have chosen to abandon that dream simply thinking it is too unattainable. However, there are ways to begin readying yourself to build your own home even if you have bad credit.
Sure the guidelines that lenders have set can be quite strict for a potential borrower. It seems like you have to jump through dozens of hoops before you can qualify for their loan to begin building your home. And this is very intimidating for someone that has a tarnished credit history as they feel they will automatically be turned away without a second thought. But, here are some tips on how to make yourself more appealing to those strict lenders so that they are willing to give you a loan to build your own home.
It is a good idea to first invest in the land to build on before you think about going for a loan to build. If you are able to secure the land, then you have collateral for the lender to consider when granting your loan. They will also take you more seriously as you have taken the first step and they will trust you to follow through on your building process.
If you have bad credit it is important to keep in mind that you will not be able to be picky with your interest rates. You are a higher risk to the lenders so they will not be able to offer you the best rates as those are reserved for those with higher credit. You will likely qualify for sub-prime interest rates instead. Remember that you can always refinance down the road when your home is actually built and you have had time to strengthen your credit.
Of course the best way to make yourself more appealing to the lender is to improve your credit score first. You can immediately do this by paying off any past due or outstanding debts. If you show your potential lender that you are seriously trying to improve your financial outlook and are able to currently manage your bills, then they will consider you to be less of a risk. Some lenders are willing to ignore past mistakes in financial responsibility if you show them that you have turned out habits around.
You can also make home loan to build more available to you by saving up a large down payment for the loan. You should have at least twenty percent of the total loan in order for the lender to consider you for the loan. A larger down payment shows that you are more invested in the project and ultimately lowers your risk as you are unlikely to walk away from something you have already poured thousands of dollars into.
Any any lender that is going to consider you for a loan is going to want to see you making smart choices like investing in a good homeowners insurance policy before you build. In fact, they are likely to require this before they would grant you a loan. This means that their investment in your property will not be in vain if an unexpected event occurs. Building a home with bad credit is possible if you take your time to prepare yourself. You will need to take steps to prove to your potential lender that you are a low risk.