Construction Loans-Bad Credit

Construction Loans-Bad Credit

From: J. H.

“Carl, I have gone down the road of debt and have gotten myself in a lot of trouble. I no longer have the credit for a construction loan, or any loan.

Is it possible with an above average job, and a lot of extra time to build a house out of your pocket? I.E. pay cash for site prep, save, pay cash for foundation, save, etc.

Thank you!!
Jason

Hi Jason,

Over the years, I have seen people try to do what you are suggesting, and I couldn’t even imagine the Hell they were going through.

Every dollar they had was invested in their house they were trying to build. The strain, both physical and mental was terrifying.

To make matters worse, the houses were progressing so slowly, the structures were deteriorating before their eyes. It was taking years, not months to build.

The elements were winning, as they always will. Their hard earned “cash” was being destroyed.

If you can’t get a house “weather tight”, or “dried in” in a relatively short period of time, you could lose everything.

Foundations can’t be left to the elements, nor can lumber, windows & doors, or sheathing. (See photo below)

(A house left unprotected & exposed to the elements)

In a few cases, back when loans didn’t require the high credit scores that they do now, we were able to “bail them out” of their Hell.

But, now credit has “tightened up”, as you know, so “bailing people out” is not as viable an option.

So, what I would do if I were you is this:

Take that “above average” job (and income, I assume) and spend the time and effort to repair your credit. It won’t take as long as you might think.

Instead of trying to pay cash to build, pay down your debts and get your credit repaired to enable you to get construction loan.

Here’s a link to some savvy advice: http://www.wikihow.com/Repair-Your-Credit

After you spend time on getting your credit cleaned up, go to Fico Scores/Reports and find out what  your credit score is. Your credit score determines the interest rate you will pay and your credit worthiness to lenders. The higher your score, the lower your rate and monthly payments will be, as well as your chances of getting a construction loan!

Then, with a construction loan, you can get the house built in a timely manner

By the way, even borrowers who have gone through a chapter 7 bankruptcy can get construction loans and mortgages after 2 years, if they have worked hard to build new credit lines.

Best of luck,
Carl