Residential Construction Loans in California
Hard Money Construction Loans

North Coast Financial is a California direct hard money lender with over 40 years of experience providing various hard money loans types. Hard money construction loans are the faster and easier alternative for obtaining financing for the construction of a residential property. Traditional lenders such as banks can take 45-60 days to fund a ground-up construction loan, while a hard money construction lender can fund within a couple weeks.

North Coast Financial is able to consider construction loans with a loan to cost ratio up to 60-65% in California with competitive hard money construction loan rates.

Construction Loan Rates in California

Current construction loan rates are in the range of 11-14% depending on various factors of the construction project. Construction loan rates are higher than many other types of the loans due to the increased risk involved in these types of projects. Construct loan rates in California are commonly lower than rates found in other states. This is due to the large amount of hard money construction lenders in California, which increases competition and keeps rates lower for borrowers.

Loan to Value Ratios, Loan to Cost and Loan Terms

The preferred loan to cost (LTC) on new construction loans is in generally 50-65%. Construction loans may also be structured based on lending a portion of the future value of the completed property, often up to 65% of the future value.

The terms available for a construction loan ranges from 12 to 24 months. In some cases, extensions on the term of the loan may be granted as long as regular payments are being made and the loan is current.

Residential construction loans may be refinanced with a conventional lender upon completion of construction if the goal of the project is to build a home to reside in. Otherwise, the borrower will most likely be selling the property in order to pay off the initial construction loan.

Ground Up Construction Loans

Ground up construction loans are specialized financing tools used to fund the construction of new buildings from the ground up (as opposed to rehabbing an existing structure). Unlike traditional long-term mortgages, ground up construction loans are only short-term and specifically utilized for the new construction of building. These loans cover the costs associated with building materials, labor, and sometimes the purchase of the unimproved land. They are commonly used for developing owner occupied residential properties such as single-family residences, multi-family units and mixed-use property.

Fund Control for Construction Loans

Construction loans utilize fund control or construction reserve accounts, which are responsible for disbursing the predetermined funds from the lender to the borrower once the corresponding construction tasks are completed. The line item budget specifies the construction tasks to be completed and the amount of funds that will be disbursed upon completion. Construction loans also contain a Contingency line item within the line item budget, which is 5-10% of the total budget of the construction costs to account for any unforeseen expenses or over budget items.

Another common requirement by the construction lender is Course of Construction insurance. This covers all of the improvements (framing, dry wall, plumbing, etc.) made to the property as the construction progresses.

North Coast Financial is an experienced provider of hard money construction loans in California. Contact us for a free consultation and to see how we can help with your construction project.