If you purchase a pre-built California home, there are many financial lenders willing to help you with mortgage finance. However, if you want to build your own home from scratch, you may meet initial financial hardship. Affordable home construction is available with a California home construction loan; however a California home construction loan is not a simple loan to understand and is not an easy loan to find.  

Unless you are very financially stable, it is very hard to build a home or do serious construction on your home without a California home construction loan. According to housing statistics from the Census Bureau, only about 20% of people who build their own houses provide direct cash payment. The other 80% of people who build homes depend on construction loans. To build your own home in California, you need a California home construction loan.

 Like previously stated, a California home construction loan is not a simple home loan to understand. The main complexity of a California home construction loan is that it is an interest-only, short-term loan. Because the California home construction loan caters to temporary home construction, it is designed to eventually be replaced by a regular mortgage when the construction is complete.

 Once you decide you need a California home construction loan to build your home, you need to consider the types of constructions loans. You have two main options for a California home construction loan.

 One option is an all-in-one loan. The all-in-one California home construction loan is a rollover home loan that converts from a construction loan to a standard mortgage loan at the end of construction. The alternative is a construction-only California home construction loan. The construction-only loan covers the construction term and requires the borrower to either pay off the entire amount at the end of the term, or replace it with a traditional mortgage loan.  

There are positive and negative elements to both of these California home construction loan options. All-in-one California home construction loans reduce the hassle for borrowers by simplifying the loan process to one set of fees and one closing. Regarding the perks of the all-in-one option; an all-in-one California home construction loan plans feature 15 or 30 year fixed-rate mortgage conversion in addition to adjustable rate mortgage exchange. This perk gives the borrower more personal freedom to choose the kind of loan they will want for a long term basis.             

 Regardless what type of California home construction loan you choose, you must consider the interest rates. In most California home construction loan situations, the interest rate is a fixed-rate for the entire construction term. If the borrower has a good credit report, the California home construction loan interest rate is typically the prime rate plus either zero, one or two percentage points. In addition, origination fees are typically anywhere from 1% to 1.5% of the entire loan amount. Because a California home construction loan is an interest-only loan, it is very important to understand the way the interest works.