Bad Credit Mortgage Lenders: Construction Loans - You and Your First Home

Picture it. Your first home. Your dream home. The home that you, yourself, are going to construct. However, you find that you are in a bit of a financial bind. There is no need to fret; the funding for your new home is available through various new home construction lenders.

Although construction loans can be issued to both owners and builders, some lenders are a bit reluctant about lending to inexperienced builders. The loan sometimes includes the cost of the land on which the new home is built. In short, construction loans set up a line of credit that pays the suppliers and subcontractors while the home is being built, making them happy.

A new home construction loan is set up in stages, which are either monthly or in accordance with the building process. During the latter stages, the amount of funds used during the specific period of time is calculated and given to the lender so that the workers can be paid.

Before applying for a construction loan, you must be approved for a residential mortgage in order for construction to begin. Stated income construction loans provide funding to help you build your new home, and do not require verification of your income, whether you are having trouble verifying it, or you simply choose not to disclose that information to the lender. In turn however, the interest rates, and subsequently, the down payment, of stated income construction loans may be a bit higher than that of any other type of new home construction loans because there is more risk involved when the income is not verified. The advantage of this type of construction loan, besides the lack of need for verification, is that these loans tend to be approved at a much faster rate.