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Construction-to-Perm (Single Close)
Converts to a mortgage automatically after completion. Simplifies closing costs.
Construction Loans in California: The Complete Guide for Homeowners & Builders
From custom homes to ADUs and renovations, Pacific Prestige helps you access competitive financing tailored to your vision.
What Are Construction Loans?
Unlike traditional mortgages that fund completed homes, construction loans finance the building process itself. Funds are disbursed in stages based on milestones, ensuring accountability and flexibility for both borrowers and builders. In California—where ADUs, luxury builds, and custom projects dominate—the right construction loan can unlock equity and control.
Loan Types
Construction Only (Two Close)
Short-term construction loan, later refinanced into a permanent mortgage.
Renovation & ADU Loans
Finances remodels, additions, and accessory dwelling units.
Owner-Builder Loans
Specialized financing for borrowers acting as their own general contractor.
Eligibility Criteria
Credit score: 680+ preferred
FHA/VA flexible options available
Down payment
20–25% of project cost
Documentation
permits, plans, budgets, insurance
Experience
Licensed general contractor required; valued for owner-builder loans
Financing Options
FHA Construction-to-Perm
HUD FHA 203(k)
VA Construction Loans
VA Housing Assistance
ADU Loans
California HCD ADU Program
Home Equity & Land Loans
Home Equity & Land Loans
Challenges & Solutions
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Appraisal gaps: Market values vs. projected costs
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Interest reserve: Covering payments during the build
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Seasoning rules: Timing restrictions for loan conversion
Download the Complete Construction Loan Guide (Free PDF) Bullets (10 Key Insights):
FAQ
What banks and lenders offer construction loans in California?
Yes — while most lenders prefer a 680+ credit score, programs like FHA construction loans and VA construction loans allow credit scores as low as 620. If you’re seeking an owner builder loan or self-build construction loan, stronger credit and financial reserves are usually required. Borrowers with lower scores can sometimes qualify by offering a larger down payment or co-borrower support.
Can I qualify for a construction loan with lower credit?
Yes — while most lenders prefer a 680+ credit score, programs like FHA construction loans and VA construction loans allow credit scores as low as 620. If you’re seeking an owner builder loan or self-build construction loan, stronger credit and financial reserves are usually required. Borrowers with lower scores can sometimes qualify by offering a larger down payment or co-borrower support.
What’s the difference between construction-only loans and construction-to-permanent loans?
A construction-only loan is short-term financing that covers the construction period, after which borrowers must refinance into a permanent loan or traditional mortgage. In contrast, a construction-to-permanent loan combines both phases into one closing, simplifying costs and paperwork. Borrowers should weigh their financing options carefully based on project size, loan amount, and long-term goals.
How do ADUs qualify for construction financing in California?
Accessory Dwelling Units (ADUs) can be financed through renovation loans, home construction loans, or builder loans depending on project type. California lenders require permits, a construction plan, and proof of construction costs. ADU financing is popular because it increases property value and generates rental income, making it an attractive equity-building loan option for homeowners.
What documentation do lenders require for construction loan approval?
To secure construction loan approval, borrowers must provide:
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A complete loan application (1003)
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Detailed construction budget and loan amount request
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Construction plan with architectural drawings and permits
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Proof of income, assets, and reserves for loan officer review
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Insurance such as builder’s risk insurance
This documentation helps lenders assess project feasibility, loan type suitability, and borrower capacity.
Ready to Build Your Dream Home?
Talk with a licensed loan officer today to explore construction loan options, owner builder financing, and permanent loan solutions tailored to your project.
