Your Credit Score and Barndominium Financing
With barndominiums gaining popularity, financing these unique homes is improving but still poses challenges compared to traditional construction loans. Most lenders will require excellent credit to mitigate perceived risk factors. Let’s explore ideal credit score targets and steps for improving your profile when seeking barndo financing.
What Credit Score is Recommended?
While criteria varies between institutions, ideal credit scores for the best barndominium loan rates start around 720+ or higher. This provides more assurance to lenders given barndos don’t yet have comprehensive comparable sales data that appraisers prefer.
most lenders will need a score ofย at least 640 to approve a loan. Scores below 640 may face greater challenges securing financing, pay higher interest rates, or need to provide a much larger down payment unless other application factors help offset credit history.
Key Factors Beyond Your Score
While your score is critical, lenders also examine debt-to-income ratios, income stability, down payment size, and reserves or assets. Recent timely mortgage payments, reliable employment history and minimal existing debts boost your case despite credit dings.
Strategies to Raise Your Credit Score
If your credit score falls short of ideal targets, take 6-12 months before applying to improve it:
– Pay down balances below 30% of limits
– Dispute any errors on credit reports
– Become an authorized user on someone else’s account
– Pay bills early to establish positive payment history
– Limit new credit applications before applying
– Maintain low credit utilization going forward
Every extra point gives you an advantage when seeking barndo financing. With some diligence, you can gain those 20-30 point bumps that could be the difference in securing your dream home loan or being left out in the cold.
While barndominium lending still presents challenges, excellent credit helps offset unique risks like appraisal gaps. Allow time for improvement well ahead of applications. With a prime score and other sound financials, custom steel home financing can be in your reach.
