Question 1

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

Accepted Answer

Most lenders require 20-25% of the total project cost, including land if you don't own it yet. This down payment protects the lender since construction loans carry higher risk than standard mortgages.

Question 2

Can I act as my own general contractor to save money?

Accepted Answer

Some lenders allow owner-builder arrangements if you have documented construction experience. Most require licensed general contractors with verifiable track records and proper insurance coverage.

Question 3

What happens if construction costs exceed my original budget?

Accepted Answer

You'll need cash reserves to cover overruns since lenders won't increase the loan mid-project. This is why most lenders require a 10-15% contingency reserve at closing.

Question 4

How long does construction loan approval take in Sierra Madre?

Accepted Answer

Expect 45-60 days for underwriting once you have complete plans and permits. The permit approval process itself adds months before you can even apply for the construction loan.

Question 5

Do construction loans require PMI after converting to permanent financing?

Accepted Answer

No, if your down payment plus appreciation during construction gives you 20% equity. Most Sierra Madre custom builds appraise higher than construction costs, eliminating PMI requirements.

Construction Loans in Sierra Madre: Financing Custom Builds in Foothill Communities