Question 1

What's the difference between a construction loan and a mortgage?

Accepted Answer

A construction loan funds the building process in phases (draws). A mortgage pays off the construction loan after the home is complete. You'll have two separate closings — one for construction, one for permanent financing.

Question 2

Do I need permanent financing approved before I get a construction loan?

Accepted Answer

Yes. Lenders require a pre-approved permanent mortgage commitment before they'll release any construction funds. This protects them if your financial situation changes during the build.

Question 3

How much down payment do I need for a construction loan in Orinda?

Accepted Answer

20% down on the land purchase price is standard. Some lenders accept 15% if your FICO is 750+ and you have strong reserves. The down payment is held in escrow until construction begins.

Question 4

How long does a construction loan take to close?

Accepted Answer

45 to 60 days is typical. The appraisal, builder review, and permanent financing pre-approval add time. Orinda's custom homes often close on the slower end due to complex site plans.

Question 5

What happens if my construction takes longer than expected?

Accepted Answer

Most construction loans carry a 12 to 24 month term. Extensions are available but cost extra. Your permanent financing lock may expire if construction runs too long — that's a real risk in Orinda's market.

Construction Loans in Orinda: Build Your Custom Home