Credit Score Needed for an Owner Builder Construction Loan
Whether you are looking to build a new home from the ground up or renovate your current home you are going to need to finance it with a construction loan, and if you are going to manage the process rather than hire a general contractor then, one of the first steps is to get an owner-builder construction loan. But before you rush off and apply for an owner builder construction loan, it's important to know what credit score is needed for this type of loan.
The answer depends on which lender you choose, but in general, your FICO credit score must be 680 or higher.
And if you're not sure what that means, this blog post will discuss everything you need to know about how credit scores affect your ability to get approved for an owner builder construction loan. Read it now and find out more!
What Is an Owner Builder Construction Loan and Who Qualifies for One?
Owner builder loans are a type of mortgage that allows prospective homeowners to borrow funds to buy land and act as their own general contractor to build their own home.
Given current economic conditions, many families are realizing they cannot afford this investment all at once. However, with an owner builder construction loan, you can have your dream home without having to wait or save up first.
Who can apply for a construction loan? Anyone! Construction loans are an excellent way to help move projects forward. Just because you don't own the land or home yet doesn't mean that there's no chance of getting this type of financing. You only need a good credit score.
What is a Good Credit Score, and Why is it Important When Getting an Owner Builder Construction Loan?
According to the FICO credit scoring model, there are five categories; poor, fair, good, very good, and excellent. The scores run between 300 and 850, with a good score being between 670 - 739, and excellent between 739-850.
Your credit score is a representation of your reliability as far as money goes. With a good credit score, you can get the best interest rates on loans and mortgages.
Before making any large purchases or applying to finance construction, you must ensure your credit score is in good shape. As with all types of loans, a strong financial history and low debt-to-income ratio will increase the chances of being approved. Most construction loan lenders will require a credit score of 680 and above.
Is There Anything Else That Can Help Me Get Approved for Financing When I'm Not Eligible Based on My Credit Score Alone?
Qualifying for and applying for a construction loan can be similar to qualifying or applying for any conventional mortgage. It may be possible to ask a relative to co-sign with you but that is not as simple a process as in a car purchase.
There are construction loans for bad credit and while they are a good deal more expensive than conventional construction loans, they can get an impossible project off the ground.