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South Pasadena's strict preservation rules make teardowns rare. Most construction loans here fund major renovations on historic Craftsman homes or ground-up builds on the few remaining lots.
The city's design review process adds 3-6 months to project timelines. Lenders want to see city approvals locked down before funding construction draws.
South Pasadena attracts buyers who want custom finishes in a walkable neighborhood. Construction loans let you build equity while creating exactly what you want.
Expect to put down 20-25% on construction loans. Lenders also reserve a 10% contingency fund for cost overruns, which happen on 70% of projects.
You need 680+ credit and detailed construction budgets from licensed contractors. Vague estimates kill deals before they start.
Most lenders cap loan-to-cost at 80%. If your lot plus build costs $1.5M, plan on bringing $300K to closing plus reserves.
Community banks and credit unions dominate construction lending here. They understand South Pasadena's quirks and price accordingly.
National lenders hate single-close construction loans in California. Too much regulation, too many inspection requirements. Regional lenders move faster.
Construction-to-permanent loans avoid two closings and lock your end rate upfront. You pay slightly higher rates during construction, but you eliminate refinance risk.
Hard money lenders fund projects traditional banks won't touch. Expect 10-12% rates and 1-year terms, but you can close in two weeks if plans are approved.
Get your contractor pre-approved by the lender before you fall in love with them. Some builders have track records that make underwriters nervous.
Draw schedules matter more than rates. Lenders who fund only at completion milestones will starve your contractor and delay your project.
Budget 15-20% above contractor estimates. Lumber fluctuates, permits cost more than quoted, and scope creep is inevitable on custom work.
Interest reserves get built into your loan. During a 12-month build, you're not making payments—the lender funds interest from your loan proceeds.
Bridge loans fund lot purchases but require separate construction financing. Construction loans cover both in one package if you're buying land to build.
Conventional loans work only after construction completes. You'd need cash or hard money to build, then refinance—two closings, double the fees.
Jumbo construction loans handle South Pasadena's higher price points. If total project cost exceeds conforming limits, you need jumbo terms from day one.
Hard money makes sense for fix-and-flip renovations under 12 months. But if you're building your primary residence, construction-perm saves money long-term.
South Pasadena's Cultural Heritage Commission reviews most projects. Budget extra time and architect fees for approvals before approaching lenders.
The city's R-1 zoning limits lot coverage and building height. Lenders want proof your plans comply before they'll issue a commitment letter.
Most lots here are small and irregular. Foundation work costs more than in tract developments, and lenders scrutinize those line items closely.
South Pasadena has no chain stores or fast food. That preservation mindset extends to residential—expect neighbor input on your project design.
45-60 days once you have city-approved plans. Without final permits, lenders won't start underwriting your file.
Some lenders allow owner-builders, but most require licensed GCs. Your rate will be 0.5-1% higher if you self-manage.
You bring cash to cover overruns. Lenders rarely increase loan amounts mid-project without significant added collateral value.
Yes, based on completed value. Appraisers use comparable finished homes to determine what your project will be worth.
Yes, but you'll qualify carrying both mortgages. Lenders underwrite your ability to pay existing housing plus construction loan interest.
12-18 months from permit to completion. Historic district reviews and California's inspection requirements add time versus other markets.
Construction Loans in South Pasadena