Most custom homes, additions and large remodels on the Central Coast are paid for with some kind of loan. Harrod Built isn’t a lender and doesn’t arrange loans, but we work with owners and their lenders on every step a lender needs from the builder. Here is a plain-English look at the usual options, so you know what to ask your bank or mortgage broker.

Building a new home on your lot

• Construction loan: a short-term loan that pays for the build in stages (“draws”). After each stage, the lender usually sends an inspector before releasing the next draw. You typically pay interest only on what has been drawn so far.
• Construction-to-permanent (“one-time close”): one loan that covers the build and then converts to a regular mortgage when the home is finished, so you close once.
• Construction loan, then a separate mortgage (“two-time close”): two closings, but you can shop for the long-term mortgage when the house is done.
• Land you already own: equity in the lot can often count toward the down payment. Ask your lender how they treat it.

Remodels, additions and ADUs

• Home equity line of credit (HELOC): borrow against the equity in your home and draw as the project moves. Often used for remodels and ADUs.
• Home equity loan: a lump sum at a fixed amount, repaid on a set schedule.
• Cash-out refinance: replace your mortgage with a larger one and use the difference for the project.
• Renovation mortgages: programs such as FHA 203(k) and Fannie Mae HomeStyle can lend based on the home’s value after the work is done. They have their own rules on contractors, draws and inspections, so ask your lender early.

What lenders usually ask the builder for

Before a construction or renovation loan closes, the lender typically wants a signed contract, plans and specifications, a line-item budget, a schedule, and the builder’s license information. Harrod Built (CSLB #986950) prepares these with you, and we work with the lender’s draw schedule and inspections during the build. If you still need plans, our sister company Harrod Drafting & Design can draw them.

We like working with local lenders such as American Riviera Bank.

Questions to ask your lender

• How many draws, and how fast is each draw released after an inspection?
• Does the loan require a contingency (extra budget for changes)?
• Can my lot equity count toward the down payment?
• What happens if the build runs longer than the loan term?
• Do you lend on ADUs, and do you count future rent?

This page is general information, not financial or lending advice. Loan programs, terms and rules change. Talk with a licensed lender about your situation.

Planning a build and working out the budget? Call Michael at 805-712-8993 or tell us about your project. See also our custom home cost and ADU cost guides.