Access to housing finance by all income groups is essential for the provision of adequate shelter for all. The study examined the mechanisms for financing incremental housing for the low and moderate income households in Ibadan, Nigeria and their effectiveness with a view to providing information that could inform policy towards effective incremental housing delivery in the study area. Primary data was collected with the use of questionnaire from 742 respondents from 4 randomly selected suburban local government areas of Ibadan, Nigeria. Two sets of questionnaires were used to obtain the data needed for the study. The results of the quantitative data were presented in both descriptive and inferential statistics while qualitative data were contextually reported. The results for housing development of the low and moderate income groups occurred in phases with the incremental process taking as much as 8-12 years for construction while improvement of the existing structure took about five and a half years. Chi-square analysis with values being significant at p<0.05indicated the financing mechanisms for incremental housing construction at the level of foundation (0.007), main structure (0.0005), roofing (0.002) and internal fixtures (0.000) vary significantly with the exception of land purchase and drainage cum sewage stages. Funding for the incremental housing process can be improved if the socio-economic and traditional attributes of the people in the area are promoted. This needs to be encouraged as a way of directing the financing mechanisms devoid of interest rate and default risks to incremental housing.