Construction Loans CA

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Overview of the construction loan building process

1. Contact Us to Discuss Options
2. Locate Land for Purchase
3. Hire Contractor
4. Sign Purchase Agreement for Land
5. Purchase Building Plans
6. Create Budget and Breakdown of Costs
7. Plan Check & Permit
8. Start of Construction
9. Inspections
10. Final Inspection & Certificate of Occupancy
11. Move-in

Contact Us to Discuss Options

Postponing a discussion about your options could be a costly mistake if you are planning on getting financing for your project. For starters, spending money on the project before you obtain a loan could deplete the reserves that will be required to qualify for a loan. Lenders typically require that you show proof of liquid assets sufficient to pay principal, interest, property taxes and hazard insurance for 6 months (reserves). If you deplete your reserves by paying construction costs, than you may not be able to qualify for financing.

Another risk of starting construction is the effect that it may have on title. A title insurer may not be willing to issue a title policy because of the possibility that a mechanics lien may be recorded against the property for unpaid labor and materials. If a title insurer will not issue a policy, then the lender will not approve your loan.

Lenders may also decline your application for a construction loan because they are not able to inspect certain building components to determine whether they conform to your plans and specifications. It is also possible that the contractor your hired for the project does not meet the lenders' requirements to qualify your project for financing.

To discuss your financing options, call us for a free consultation at 1-800-438-2704.

Locate Land for Purchase

Finding the perfect place to build your dream home requires some thought. Aside from the increased cost of building on certain lots, if you are financing your construction, then you need to consider whether the home you are building is suitable for the neighborhood. Loan amounts are capped by the appraised value of your future home. If the home that you are building does not conform to the neighborhood, then the appraisal will be reduced accordingly. Click here for tips on purchasing a land lot

Hire Contractor

Once you locate the land, you will want to interview potential contractors. It is a good idea to interview at least three contractors prior to selecting one for your project. The contractor that you select will need to meet certain experience and licensing requirements in order for the lender to approve a construction loan. It is a good idea to verify that the contractor meets the requirements early-on. Click here for steps to take before hiring a contractor

Sign Purchase Agreement for Land

After your contractor verifies the zoning for the land and your project, you will need to negotiate a sales price with the seller. When an agreement is reached, it must be put in writing.

Purchase Building Plans

After you purchase a lot, you will need to design your project and purchase building plans. There are a variety of companies that offer inexpensive home plans via the Internet, software and magazines. As an alternative, you may want to hire an architect and/or designer to work with you to draft custom plans. The design will be a substantial factor in the resale value of your home and you may want to invest the extra money to hire an architect to draw your plans.

Create Budget and Breakdown of Costs

In order to get your construction loan approved, your contractor will need to prepare a construction budget with a breakdown of the costs.

Plan Check & Permit

Your building plans will need to be approved by your local building department/community association before construction can start. When you plans are approved, a building permit will be issued.

Start of Construction

Now that you have approved plans, building permits and financing, you are ready to begin construction.

Inspections

The city/community association will inspect your project at various points during the construction in order to make sure that the work is proceeding according to the plans and in compliance with building and safety codes and regulations. The inspector has the power to issue a "stop work order" if violations are found.

Final Inspection & Certificate of Occupancy

When construction is completed, a final inspection will be performed by the city/community association inspector and a certificate of occupancy issued.

Move-In

Construction is complete and you have your certificate of occupancy. Now it's time to move-in and start enjoying your custom home.