Construction loans in California, in plain words.
A construction loan pays to build a home. OriginPoint’s program is a one-time close: one loan that covers buying the land or lot and building the home, and then becomes the permanent mortgage once the home is built. This page explains how that works and what a lender reviews. It quotes no rates.
Sam Batayneh is a mortgage loan originator (NMLS 332474) and VP of Mortgage Lending at OriginPoint (NMLS 1598647). Sam has originated mortgages since 2004 and lends in all of California. This description comes from OriginPoint’s published materials. Ask Sam about current availability.
What is a one-time-close construction loan?
One loan, with one closing, that pays for the building work and then turns into the long-term mortgage when the home is finished.
Building a home has traditionally taken two loans. The first is a short-term construction loan that pays the builder. The second is a regular mortgage that pays off the first once the home is done. That means two applications, two sets of closing costs, and a second approval at the end, when your income or your credit may have changed.
A one-time close folds the two into one. You apply once and close once, before the work begins. The loan pays for construction in stages, and when the home is finished it becomes the permanent mortgage, without a second closing. OriginPoint describes its program this way: one loan that covers buying the land or lot and building the home, and then becomes the permanent mortgage once the home is built.
The trade is that more has to be settled before closing. The builder, the plans, the budget and the schedule are all part of the file, because the lender is lending against a home that is not there yet.
This description comes from OriginPoint’s published materials. Ask Sam about current availability. Construction loans on the Loan options page.
Are you building a home, or buying new construction from a builder?
They are financed differently. A construction loan pays to build your home. A home bought from a builder who is already building it is financed with a regular mortgage that closes when the home is finished.
Construction loan
You own or are buying the lot, you choose the builder and the plans, and the loan pays for the work as it is done. OriginPoint’s program is a one-time close.
New construction
A builder is building the home and sells it to you when it is finished. OriginPoint’s builder options include extended rate locks, which it also calls Lock ’n’ Build: a longer rate lock that covers the time until the home is finished.
A third case is a home that already stands and needs work. That calls for a renovation loan: one loan that pays for the home and for the work on it. Renovation loans on the Loan options page. New construction on the Loan options page.
How does the money move during construction?
In stages. The lender pays the builder in draws as each part of the work is finished and inspected, not in one sum at closing.
Before closing
The lender reviews you, the builder, the plans, the budget and an appraisal of the home as it will be when finished. All of it is settled before the loan closes.
Closing
You sign once. If the loan is also paying for the lot, the lot is bought at closing.
Draws
As the builder finishes each stage, the builder asks for a draw. The lender usually sends an inspector to confirm the work before it pays.
Payments during the build
Construction loans commonly charge interest only on the money paid out so far while the home is being built. How OriginPoint’s program handles this is in its own terms, so ask Sam.
Changes and delays
Building can run late and costs can change. A budget usually carries a reserve for that. Ask what happens under the loan if the build takes longer than planned.
When the home is finished
After a final inspection, the loan becomes the permanent mortgage, and regular payments of principal and interest begin.
Rebuilding after a fire? Please call Sam with any fire rebuild questions: (323) 902-1112.
What do lenders usually review on a construction loan?
You, the builder, the plans, the budget and the future value of the home. This is a general list, not OriginPoint’s requirements.
- Your file. Income, savings, credit and reserves, as on any home loan.
- The builder. A licensed contractor, with the license, insurance and track record the program asks for.
- Plans and specifications. Drawings and a description of what will be built, and the permits or the path to them.
- The budget. A line-by-line cost of the work, a schedule, and a reserve for surprises.
- The lot. Who owns it, what is owed on it, and whether it is ready to build on.
- The appraisal. An opinion of the home’s value as it will be when finished, based on the plans.
- Insurance. Cover during the build, and a homeowners policy when the home is done.
How does a construction loan fit with jumbo loans and other programs?
The county limit applies to a construction loan as to any other: a loan above it is a jumbo loan, with the lender’s own rules.
Program names are OriginPoint’s. Which one fits depends on your own file, and naming a program here is not a promise that a loan will be approved. OriginPoint publishes its own conditions and disclosures for each program, and those apply in full: ask Sam for them.
Plain answers about construction loans.
What is a one-time-close construction loan?
How is a construction loan different from a regular mortgage?
Can one loan pay for the land and for building the home?
What is the difference between a construction loan and new-construction financing?
General education only. Each lender sets its own rules, and they change. Nothing here is a promise that a loan will be approved or of any terms. This is not tax, legal or investment advice: for those questions, ask your own CPA, attorney or business manager.
Planning to build?
Tell Sam about the lot, the builder and the budget. Sam will tell you what the loan would need, in plain words.