Construction Loans CA

One of our most popular construction programs is the "One-Time Close" loan, which is also known as a "Single Close",  "Construction-to-Permanent" or "CTP" loan.  A "One-Time Close" loan allows you to build or rehabilitate a primary or vacation home.  One-time close means that there is one application and one closing for the purchase or refinance of the lot, construction costs and the permanent mortgage.   Although a lot may be purchased with this type of loan, unless you are buying the lot from a builder that has plans that are acceptable to you, the lot will probably have to be purchased separately.  Sellers do not usually want to delay a lot sale while you obtain approved plans to qualify for a construction loan.  

As a combination loan program, a "One-Time Close" bundles up to three loans in a single application and closing.  At the closing, you will receive financing for the purchase of a lot.  If you already own the lot, then it will be refinanced so that you can use your equity in the lot as a down payment for construction.  In addition to providing for the purchase or refinance of the lot, a "One-Time Close" loan finances your construction costs.  You access funds by making draw requests during the construction.  Once construction is finished and you receive a certificate of occupancy, the loan converts to a permanent mortgage.  The rate of your permanent mortgage can be locked at the beginning of construction or you may exercise a "float down" option that allows you to benefit from declining interest rates.  Depending upon the program that you select, there may be a charge for the "float down" or to lock your rate.  You may select from fixed or adjustable rate programs during the construction phase and for the permanent mortgage.

By combining up to three loans in a single application and a single closing, you save money on escrow fees, title insurance fees, recording fees, flood certification fees and appraiser fees.  You also secure your permanent mortgage so that you do not have to worry about what will happen if your financial situation changes and you are not able to qualify for a mortgage when the home is finished.  Another advantage is that the "One-Time Close" loan allows you to borrow money based upon the future value of the home.  The future value is determined by an appraiser who reviews the building plans, compiles comparable sales data and renders a written opinion as to the value of the home once it is built.  For example, if the future value of your home is appraised at $600,000, and you can meet the financial requirements for qualifying, then you will be able to borrow up to 95% of this amount or $570,000.  For people who have excellent credit, there are programs that may allow them to borrow 100% of the future value of the home.

If you found the perfect lot but you are not ready to being construction, then a lot loan is a good option.  Lot loans are available to purchase or refinance undeveloped land.  Down payments start as low as 10% and reduced documentation loans are available.  Lot loans are considered interim loans and have maximum terms of 2 or 5 years.  At the end of the term, you can either being construction or refinance the lot.  Programs are available for fixed or adjustable interest rates and payments are amortized over 30 years. These terms are also available for refinancing a lot that you already own.

If you already own your home and you are looking to remodel it, the remodeler loan is a good option.  Remodeling can be just updating your home with new paint and flooring or as involved as building an addition to the home, converting a garage or building a swimming pool and spa.  The amount that you can borrow is based upon the future value of your home so that your borrowing capacity is maximized.  For example, if your home is currently worth $500,000 and you are doing a major remodel that will increase the value of the home to $650,000, your loan amount will be based upon the future value of $650,000.  The remodeling loan is a second mortgage and depending upon your situation, the interest may be tax deductible.

Rehab loans provide financing to renovate an existing home or to purchase and rehabilitate a new home.  For those of you who want to take on the challenge of a "fixer-upper",  the rehab loan is the solution.  The amount that you may borrow is not limited by the value of the existing home.  Instead, your loan will be based upon the projected value of the home after the repairs are completed.   By financing the purchase and rehabilitation of the home in one loan, you save time and avoid the costs of a second mortgage.  This is a great loan if you want to make repairs but do not have enough equity in your home to get a new first mortgage.

A home equity line of credit is a fast and easy way to access 100% of the equity in your home.  You can either receive the full amount of your credit limit in a single check at closing or you may access funds as you need them through a credit card or convenience checks.  A home equity line of credit may be combined with a construction loan to pay costs that will be reimbursed through draws.  In addition to providing financing for home improvements, this is a great way to meet your on-going financing needs.  The  interest rate is considerably lower than the rate for consumer credit cards and money may be borrowed and repaid on an on-going basis like a credit card.   You only pay interest on the funds that you actually withdraw.  Depending upon your situation, you may also be entitled to a tax deduction for some or all of the interest that you pay.  For further information on tax savings, consult your tax professional.

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If you want to live in your existing home while you build your dream home, then a bridge loan may be the perfect solution.  Combined with a construction loan, a bridge loan gets you access to your equity without having to sell your home.  The bridge loan is paid-off when your existing home is sold and you are ready to move into your new home.  A bridge loan has the added benefit of not requiring payments during construction.  Also, a bridge loan will not affect your debt ratio for the construction loan because it is considered interim financing.  If you had to sell your home to access the equity needed for a construction loan, then you would probably have to pay rent for housing until the completion of construction.   Although interest accrues on a bridge loan, it will probably be cheaper than paying rent for equivalent housing during the term of construction.  A bridge loan is only available in conjunction with a construction loan on a home that you will occupy as your primary residence.