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Construction Loans in California

Navigating the world of construction loans can be a daunting task, especially when you’re looking to build in a state as diverse and dynamic as California. Understanding your options is key, and that’s where Pacific Mortgage comes in. Since 2006, we have been turning the dreams of homeownership into reality for thousands of Californians. Whether you’re considering a construction loan for a manufactured home, delving into the specifics of a construction-to-permanent loan, exploring the potential of a USDA construction loan, qualifying for a VA construction loan, or eyeing an ADU loan, Pacific Mortgage has the expertise and solutions to meet your needs. Ready to apply now? Click here to start.

What are Construction Loans?

Construction loans are short-term, interim loans used for new home construction or remodels. In California, the two primary types of construction loans are one-time close construction loans and two-time close construction loans. 
  • A one-time close loan is a type of construction-to-permanent loan where the borrower can convert the construction loan to a traditional mortgage after the construction is completed. 
  • A two-time close loan involves two separate loans – a short-term loan for the construction phase and a separate mortgage loan to pay off the construction loan after completion.
In addition to these, there are specific loans designed for unique circumstances. The construction loan for a manufactured home is tailored for those looking to finance the building of a factory-built home, while a USDA construction loan or a VA construction loan provides affordable financing options for those building in eligible rural areas. 

How Are Construction Loans Different Than Conventional Mortgages?

Construction loans and traditional mortgages differ in several crucial ways. For starters, construction loans are short-term, typically not exceeding a year. In contrast, traditional mortgages are long-term, with terms generally spanning from 15 to 30 years. In a traditional mortgage, the borrower gets the loan amount in a single lump sum and begins making payments – which include both the principal and the interest – right after closing the loan. However, with a construction loan, you’re usually required to make interest-only payments during the construction phase. It’s also worth noting that construction loans often carry higher interest rates compared to most home loans, given that they pose a higher risk for lenders.

Why Choose Construction Loans in California?

Construction loans offer several benefits. They allow for the customization of your home, the ability to pay interest-only during the construction phase, and the potential to lock in a mortgage rate before construction begins. And with Pacific Mortgage, you’ll have a trusted partner guiding you every step of the way, offering expert mortgage solutions tailored to your unique needs.

Renovation Loans

Renovation loans, otherwise known as FHA 203(k) loans, are insured by the Federal Housing Administration (FHA). These loans provide a unique opportunity for borrowers to purchase and renovate their new home, with one monthly payment covering both costs. Borrowers with conventional loans can also access these loans through organizations like Fannie Mae (HomeStyle Renovation) and Freddie Mac (CHOICE Renovation). Pacific Mortgage offers renovation loans, as well as, a cash-out refinance option, which can be an alternative route to financing your home renovations. With a cash-out refinance, you can leverage part of your home equity, adding what you’ve withdrawn to your new mortgage principal. Other possible options include a home equity loan or a home equity line of credit (HELOC). Regardless of your home transformation goals, there’s a wide range of financial solutions available to help you get started on your renovation project. Pacific Mortgage has multiple renovation loan and mortgage options.

Requirements For Qualifying

Qualifying for a construction loan in California involves meeting certain credit score requirements, income requirements, and having a down payment. Your home builder will also need to be approved. But don’t worry, Pacific Mortgage has served thousands of people in different financial situations. Give us a call to find out if you qualify for a construction loan.

Process of Applying for Construction Loans in California

Applying for a construction loan involves submitting a detailed loan application, providing requisite documentation, and going through a thorough review process. In the case of an ADU loan, specific requirements related to the planned unit’s size, design, and location may also need to be met. 

Top Lenders for Construction Loans in California

There are many lenders offering construction loans in California. Each offers different interest rates, loan terms, and customer service levels. Some lenders specialize in certain types of loans, such as USDA construction loans or ADU loans. At Pacific Mortgage we have helped thousands of Californians get the best mortgage possible for their situation.  Contact us if you have questions about conventional construction loans (both jumbo and conforming loan limits),  FHA loans, VA construction loans or any mortgage loan you are considering.

Tips to Secure the Best Construction Loan in California

Securing the best construction loan requires careful planning, thorough research, and strategic decision-making. This includes understanding your financial situation, comparing different loan options, and considering the specific benefits of various types of loans, such as construction-to-permanent loans or USDA construction loans.


Construction loans in California offer unique opportunities for prospective homeowners. Whether you’re considering a traditional construction loan, a construction-to-permanent loan, a USDA construction loan, or an ADU loan, understanding the intricacies of each can help you make an informed decision that aligns with your financial goals and homebuilding dreams. Down payments can be as low as 10% on ground up construction and 5% on renovation loans. From understanding what a construction loan is to knowing how to secure the best one for your needs, we hope this guide has provided you with valuable insights and practical knowledge. As you embark on your homebuilding journey in the Golden State, remember that the right construction loan can turn your dream home into a reality. And with Pacific Mortgage by your side, that reality is closer than you think.

FAQs about Construction Loans in California

    1. What are the requirements to qualify for a construction loan in California? To qualify for a construction loan in California, you typically need to meet certain credit score requirements, have a substantial down payment, and provide proof of income. For specific loans like the USDA construction loan, additional criteria such as location and income limits may apply.
    2. How can I apply for a construction loan in California? Applying for a construction loan involves submitting a detailed loan application, providing requisite documentation, and going through a thorough review process. Some loans, like ADU loans, may have specific requirements related to the planned unit’s size, design, and location. Contact us to find out if you qualify today.
  • What are some tips to secure the best construction loan in California? Securing the best construction loan requires understanding your financial situation, comparing different loan options, and considering the specific benefits of various types of loans, such as construction-to-permanent loans or USDA construction loans.

Reasons Why Clients Like Construction Loans


With a construction loan, individuals have the flexibility to design and create a home exactly to their liking, rather than settling for an existing structure that may not meet all their needs or preferences.


A construction loan allows people to build a new home with modern features and technologies. Everything in the house will be brand-new, reducing the need for repairs and maintenance that often come with older homes.


Construction loans give homeowners the freedom to choose their preferred location and build a home there, rather than being limited by the availability of pre-existing homes in desired areas.

Financial Flexibility

During the construction phase, borrowers typically only have to make interest payments on the money that has been drawn, which can ease financial burden during this period.

Potential Savings

Depending on the housing market, building a home can sometimes be more cost-effective than buying an existing one, especially if the borrower is capable of doing some of the work themselves.

Future Mortgage Rates

Some construction loans, known as construction-to-permanent loans, allow borrowers to lock in their mortgage interest rate before construction begins, providing protection against potential rate increases during the building process.  In most cases, we are also able to float down the rate to a better rate if the current market is better than the rate initially locked in.


Building a new home allows for the incorporation of energy-efficient materials and technologies, potentially leading to long-term savings on utility bills and a smaller environmental footprint.

Investment Opportunity

For those looking to invest in real estate, obtaining a construction loan to build a property can offer significant returns once the property is sold or rented out.

How To Start

Ready to turn your dream home into a reality? It all starts with a single step, and that’s reaching out to a trusted lender like Pacific Mortgage. With our years of experience and dedication to helping Californians achieve homeownership dreams since 2006, we are ready to guide you through the intricacies of construction loans. Whether you’re looking to build a customized home, secure a property in your desired location, or seize an investment opportunity, Pacific Mortgage is here to help you navigate the process. Remember, securing a construction loan is a significant decision that requires careful planning and consideration. Don’t leave your dreams on the drawing board. Take the first step towards building your dream home today. Contact us to find out if you qualify for a construction loan. Our team of experts is ready to answer your questions and provide you with the right financial solutions tailored to your needs. Contact Pacific Mortgage Today