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Why Will So Few Lenders Finance New Construction?

“New construction loans are one of the first things that go away when the mortgage crisis hit”. Building a new house is a difficult thing to do in this day and age and there is a fairly simple reason for this.

In today’s market, all loans that lenders do they want to be insured. Whether those insurers are Freddie Mac, Fannie Mae, FHA, VA, or USDA; during a mortgage crisis, these insurers don’t really insure construction loans. This creates a situation where new constructions loans are very risky for a bank should something happen.

What happens that makes these loans so risky?

If someone is to start building a property, and for some reason, the builder runs out of money, they do not and cannot finish the project. Of course, no person wants to live in an unfinished house, therefore the lender is now stuck with that unfinished property, which they don’t want to have happen. Thus, this is the risk of new construction loans.

The bank or lender then will have to use their own money to finish the project and then, once finished, try to sell on the secondary market.

I want to build or buy a home, what do you do?

If you are in the market for building or buying a home loan, reach out to us today. We’ll provide the guidance and information you need to make your dream home come true while being honest and transparent.

Bobby Atkisson

Bobby Atkisson

Bobby Atkisson is a seasoned mortgage professional who provides high quality financial services to military members and veterans. With over 14 years experience in the lending and financial industry, his mission is to provide high quality mortgage programs with the most competitive interest rates. For expert advice and guidance on VA Home Loans and Refinance, contact Bobby today at 800-537-2050.