are new construction loans available if you have bad credit?

Asked by Chris Williams, Outside U.S. Sat Nov 19, 2011

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Jameel Lopez, Home Buyer, New York, NY
Wed Oct 28, 2015
Your best bet would be contacting Home Loans For All. They specialize in all home-buying situations and especially credit issues and past short sales or foreclosures. Here's a link to them.
29 votes
Mike Wilson, , 75201
Tue Dec 1, 2015
Check with Home Loans For All. They have the ability to reach out to their network of lenders to determine which lenders can help with your situation. They also can assist in mortgage prep/credit restoration if you need it.
26 votes
Andrea Gomez, Other Pro, San Antonio, TX
Sun Aug 18, 2013
Yes FHA loans can finance you with a score as low as 580 with 3.5% down. Check out The Lenders Network they can get you to the right lenders to help you.

Good Luck!
10 votes
Tatumlea, Home Buyer, Sebastopol, CA
Thu Jun 16, 2016
When you need construction loans, bad credit can really limit your options. Loans of all kinds are becoming more difficult to obtain because the standards of lending are getting harder to meet. That doesn't necessarily mean you'll have to put your dreams on hold, but you will need to take a few steps before you apply for a construction loan.

Construction loans are products offered by banks and other lenders. A construction loan can be used to build your first home, build a second home while you still reside in your primary residence, or make additions or repairs to an existing home. Construction loans typically have short duration, and some are simply converted to mortgages once the construction has been completed.

As with any loan, your chances of being approved will increase if you can minimize the risk to the lender. But what if you already have a bad credit rating? Fortunately, there are plenty of ways to get the construction loan you need, regardless of your credit rating.

There are construction loan options for everyone. You just need to know where to look. If your bank or credit union can't help you, go online to compare rates on construction loans. Some lenders even specialize in high-risk loans. You will pay a higher interest rate than a prime borrower, but at least you'll get the financing you need to make your home construction a reality.
7 votes
Megan Miller, Home Buyer, Fresno, CA
Mon Sep 28, 2015
Have you tried The Lenders Network? I was in a similar situation and they found us a lender to help us get approved.. Good luck!
3 votes
Steven Hakes, Mortgage Broker Or Lender, Dallas, TX
Mon Nov 21, 2011

I know the answers may sound complex, and that is only because of the complex regulatory world we as lenders are in today. My best advice would be to engage with a lending professional that has a broad range of products available, and then provide them with full disclosures of your situation and goals. There are a few of us out there that will be willing to provide a plan to get you there even if we cannot approve your loan request today.

Hope this helps!
Web Reference:
1 vote
Lucy Puniwai, Agent, Haslet, TX
Sun Nov 20, 2011
AMEN TOM! That is precisley the point I was making!
1 vote
Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Sun Nov 20, 2011

1. You will find that some realtors come in here and try to answer finance questions.
You should rule THOSE agents out immediately!!!!!!
Professionals do not do that. Just as professional lenders do not answer realtor questions.

2. If the credit isn't up to par.... Look into this free e-book...…

Let me know if you have any questions.

Tom Burris
Mortgage Banker
(214) 763-4629 cell/text/nights/weekends(Really!!)
Lending all across the entire Great State of Texas!!
1 vote
Katinafortso…, Home Buyer, Fort Worth, TX
Fri Mar 31, 2017
If you & Your spouse have a credit score in the 600 but your spouse have 2 things on his credit 2 state liens that can be paid off & back child support that going to be set up for payments. on his credit but make 45,000 to 48,000 a year. I work part-time is it hard to get a New Construction loan.
0 votes
Jestine L, Home Buyer, Gray Court, SC
Fri Mar 18, 2016
Is there any help for construction VA loan for people with bad credit in SC?
0 votes
Alex Reinig, , Pittsburgh, PA
Fri Feb 6, 2015
Feel free to contact me directly- Here is a snapshot to Construction loans we offer:
-CTP loans can be on Primary Residences and 2nd Homes for ground up construction, lot acquisitions, tear down, renovations/additions, modular homes, log home , stick built homes with loan amounts up to $2.0MM.
- We "do not" qualify the builder, we quailfy the client. Builders LOVE this!!

Key Points
1. This is a Citizens Bank portfolio product, we can finance up to 90% loan to value of the entire project. This is point is usually the one your clients will appreciate! At this point in time Citizens is one of the only lenders that will loan on a 90% LTV with NO MI!!!

2. The construction loan is a true “One Time Close” with the first 12 months payment being interest only during construction for the borrower. When construction is complete the loan modifies to a fully amortized loan with principal and interest payments. Borrowers retain the ability to further modify the loan if they have additional savings or down monies at the time of the home completion/modification (Ex. Sale of an existing home mid or even post construction). To reiterate; there is no need for duplicate closings, even in the previous example.

3. Closing costs for the borrower are the standard closing costs for a mortgage, purchase or refinance. The only additional fees that would be typical to the client would be the costs to pay for the draws and final inspection.

4. In case were we need a custom draw schedule Citizens may accommodate per the contract guidelines set forth and approved.

5. As the Builder you can get up to a 10% Advance draw at the construction loan closing for start up funds.

6. Curb side funding is available and we typically wire the monies into your account direct.

7. No long term rate locks are needed, we can lock the borrowers at application! This rate translates to both construction and perm loans, keeping it simple!

8. CTP loans can be on Primary Residences and 2nd Homes for ground up construction, lot acquisitions, tear down, renovations/additions, modular homes, log home , stick built homes with loan amounts up to $2.0MM.

9. Final and most important for the site GC/builder! Citizens Bank has limited to no Paperwork, no credit checks, no financials. Citizens does require a disbursement schedule to be in the contract and/or provided and does require a copy of a license and insurance needed for the state you are building in (if applicable.) This fact alone makes this a fairly simple process for our builders in our network.

Alex Reinig
Sales Manager- 412-889-3310
0 votes
What is the minimum credit score for the construction loan?We have 90,000 and we are thinking about buying a lot so we can build within a year.
Flag Fri Feb 5, 2016
hobug1960, Home Buyer, East Liverpool, OH
Sun Mar 23, 2014
can you get a construction loan with one late 30 days past due payment...did send this payment out but somehow got lost in the mail....still holding this against me...was this past Janurary.
0 votes
AJ Macias, , Texas
Mon Nov 21, 2011
Hey Chris
the short answer no ..But if you have a mid fico score of 620 then yes you are good to go with the best financing available...Pick a realtor in your area to register you, with all the builders,then visit the home builders model registering you & your realtor, when you register your self. You cannot buy any home from any builder cheaper... if you do not use a realtor...In my case i also give to my buyer any of the builders incentives and multi sale bonuses back to my buyer ...They can then buy new furniture to go with that new home.
AJ Macias Broker Sharp Realty
0 votes
Lucy Puniwai, Agent, Haslet, TX
Sun Nov 20, 2011
Dear Rick,

I did not assume "my" response was incorrect. I choose not to prequalify consumers as I prefer to not be exposed to their personal financial information. Morgtage rates etc change frequently and I cannot accept the responsibility of "pre-qualifying" my buyer. My area of specialty is in assisting buyers after the approval process as there may be intricasies that as a Realtor, I may oversee. Finance is not my specialty and am an essential piece of the transaction process in my area of expertise.
I congratulate you that you are qualified to perform provide this service. All due respect, the verbiage you used in your initial response was received as an insult to those that participate in this forum as per your statement "I am sorry you are not getting good answers". were the only Agent to address the responses of other's and this is where I believe you crossed a boundary.


Lucy A. Puniwai
0 votes
Tommy Burris, Mortgage Broker Or Lender, Baton Rouge, LA
Sun Nov 20, 2011
Are you looking for a 'Construction Loan'?
Buying from a builder?

I ask because many buyers get the two confused.

Answering this question will help narrow things down. And then it will depend on how 'bad' your credit is.... Some folks think it is bad when it really isn't..... Just saying.

But: I can tell you this.... I you are looking for a construction loan where YOU finance the construction costs.... These are hard to get.

Buying from a builder when THEY already financed the building part and you are buying from the builder.... Then marginal credit is still ok.

Tom Burris
Mortgage Banker
(214) 763-4629 cell/text/nights/weekends(Really!!)
Lending all across the entire Great State of Texas!!
0 votes
Hello, My Name is Brandi My husband and I found a home w/DR Horton Just found out today my husbands credit score was a 620 until we had to trade one of our truck in for a back seat. So now the score is 608 he is trying to get a VA loan!!! Lost as to what we need to due at this point, On our Credit we show that we had to get a Hamp to lower our payment, due to Attorney fees for my husbands children, What can we do now??? Best, Regards Brandi Ivey
Flag Wed Nov 20, 2013
Rick DeVoss, Agent, Ft Worth, TX
Sun Nov 20, 2011
Reply to Lucy:
I said that not all answers were "good" answers; YOU are the one who assumed that your answer was "incorrect." Not sure what you mean by being a team player in these forums, but I for one am not on your team! When you use the phrase "my lenders" have already shown a presumptive attitude that is not healthy in our industry. The buyer should select his own lender, and by the way, most lenders do not charge an up-front fee for pulling a credit report during pre-qualification. But my point was, that by doing it your way, the borrower winds up with an inquiry on his credit report. Buy pulling his own credit report, the borrower has an opportunity to work on bringing up his "bad credit score" before he goes to a lender, and thus he will have a higher score when he does get a lender to pull the merged report.

Perhaps the reason that you as an agent always refer finance questions to a loan officer is because you have not bothered to study that part of our business enough to know how to answer the questions posed by a customer. Take some more MCE classes. Sit down with an experienced loan officer and ask them to guide you through the pre-qualification process. There are many things you can do as an Agent that will pre-qualify the borrower right up front. I usually do that in the first 30 minutes of talking to them. Why waste a loan officer's time if the buyer is not able to qualify? Then you have to either work with the buyer until his crecit score is acceptable, or pass them by without helping them at all.

I like to offer a full-service consulting session, where a buyer can get ALL of his questions answered. As a Certified Instructor in Credit Repair, I will then help him bring his FICO score up. In conjunction with that, I can also offer some financial investing advice. If we are talking about first-time-home-buyers, they all need a checking account, a savings account, and a credit card. Life insurance is important to young families, and so are annuities and small savings accounts. To top it off, I can offer them a way to save money on their monthly energy bills. Any money saved can go toward the down payment on their house!

I am sure the consumer will be able to tell which agents are posting stuff on here to toot their own horn, and which ones are actually trying to answer the question and provide helpful information to the customer.


Rick DeVoss

---The Michael Group

0 votes
Wow Lucy and Rick, all the bickering has got me lost. Take the fight some place else and let the grown-ups answerer the questions.
Flag Thu Nov 20, 2014
Lucy Puniwai, Agent, Haslet, TX
Sun Nov 20, 2011
@ Rick - not sure all answers are incorrect. PLEASE be a team player in these forums - we are all trying to help and not sell our services. I am an agent that always refers finance questions to the profession where it belongs - so please do not categorize all answers as "incorrect". My Lenders do not charge a fee to pull his credit unless he is able to close the deal so he would not pay anything until he is a qualified buyer.
I thank you in advance for your professional integrity.

Lucy A. Puniwai
0 votes
Rick DeVoss, Agent, Ft Worth, TX
Sun Nov 20, 2011
Dear Chris, ...I am sorry you are not getting good answers to your question. The very first thing you should do, if you haven't already, is pull a copy of your own credit report along with the score. You will need to pay a fee for that, but it does NOT count as an "inquiry" on your credit report. Then when we have analyzed where you stand, we can determine what you need to do about your credit report, and whether or not you are ready to go to a loan officer and ask them to pull your merged credit report from all three agencies.

You should contact me for a (free) consultation. I can help you clear up discrepancies on your report and raise your score. Not all real estate agents have the training or the experience to do this.

So, how do you know that you have "bad credit"?? Who told you that?

There is a difference in buying a new house and getting a loan to start new construction on your own. And if you are truly "outside the U.S." as you have stated, then why are you asking this question?

Get back in the country first, then we can pull your credit report and get to work on setting up some financing for you.

Good luck!

Rick DeVoss

---The Michael Group

0 votes
John Reaves, Agent, Fort Worth, TX
Sun Nov 20, 2011
Typically most home loans go FHA. FHA is not a lender, but an insurer of loans backed by the government. To qualify for an FHA loan you need a credit score of 640. There are some lenders out there you are able to qualify you for a loan with a credit score of 580. Because they are not insured by the government you will probably have a higher interest rate.

Talk with a realtor; they will be able to get you in touch with a reputable lender. Find out what you credit score is and work with the lender and realtor to make a game plan. You should work with a realtor even on new construction. You need to have someone looking out for your best interest. Remember the sales person with the builder works for the builder and probably isn’t licensed.

If you have any questions feel free to contact me.

Good Luck,
John Reaves
Keller Williams Realty
817-789-5542 (cell)
817-920-7700 (office)
0 votes
Dallas Texas, Agent, Dallas, TN
Sun Nov 20, 2011
As with any loan if your credit scores are low difficult to obtain any loan new construction, cars, lines of credit and etc.

Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes
Lucy Puniwai, Agent, Haslet, TX
Sat Nov 19, 2011
The first thing to do is have a Lender (and Lender only) pull your credit. You do not want to have your credit pulled too many times before buying a home or even considering it. As far as Builder loans, most Builders have a "preferred Lender" that they encourage you to use so they will in turn pay some of your closing costs. Depending on your window in buying a home, a good Loan Officer will help you rebuild your credit. Depending on your credit scores, you can get them higher by following the recommendations made by the Loan Officer. In Texas you must work with a Lender that is licensed to do business in this state. Again, depending on what your time frame is buying a home, I can recommend a couple Lenders that will help you see the "big picture".

Happy to help!

Lucy A. Puniwai
0 votes
Don Groff, Agent, Austin, TX
Sat Nov 19, 2011
Hi Chris,

It really depends on how bad your credit is and what is causing it to be bad. As far as FHA financing is concerned you can get the same rate with a 640 credit score as somebody with a 750.

Best of luck to you,

Don Groff
REALTOR® | Mortgage Broker
Keller Williams Realty | 360 Lending Group
o.512.669.5599 m.512.633.4157
0 votes
Annette Siev…, Agent, Corvallis, OR
Sat Nov 19, 2011
You will only know if you apply. Go to a local bank and to a loan officer who comes recommended and knows special programs. But it really depends on how good or bad your credit is and how much cash you have. Be prepared that if you can get a loan it will be higher in interest.
0 votes
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