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California Construction Financing: Builder’s Lender vs. Mortgage Broker

Will you be building a new home in California in the near future? Do you need a mortgage loan to finance a new construction?

Your first impulse might be to use your home builder’s lender. And it could be the most convenient route, especially if the builder has its own in-house lender. Less hassle, right?

But it might not be the best deal for you, as the home buyer and borrower. By working with a California mortgage broker to obtain new construction financing, you could access a broader range of loan options and possibly secure a better deal.

Two Paths to Construction Financing in California

When having a new home built in California, borrowers basically have two financing paths to choose from. You can use the builder’s preferred lender, or shop around for other home loan options.

A lot of builders in California either have a preferred lender that they work with, or an in-house financing department that’s part of the same company. But in both of those cases, the borrower has limited options to choose from.

When you work with a single mortgage lender to obtain construction financing, you’ll be limited to whatever loan products that lender offers.

A California mortgage broker, on the other hand, can help you choose from a wide range of new home financing options and products. Mortgage brokers act as a kind of intermediary between borrowers and lenders. They typically partner with multiple lenders to give their clients access to more loan products.

Here at Bridgepoint Funding, for example, we work with numerous lenders that offer many different types of home loans for new construction financing in California. And a lot of those loans are very flexible when it comes to credit scores, debt ratios, and other qualification criteria.

Here are some of the other benefits of using a mortgage broker for new construction financing in California.

Benefits of Using a Mortgage Broker

More lenders, more options, more guidance, and a more personal working relationship. Those are some of the key advantages of using a mortgage broker rather than a home builder’s preferred lender. So let’s explore these and other benefits…

1. Access to more lenders and loan products

We already touched on the number-one benefit of using a mortgage broker for construction financing in California. And that’s variety.

Brokers typically have relationships with a broader network of lenders, compared to the limited options that are offered by builders. This allows them to shop around and find you the most competitive rates and terms from a wider pool, potentially saving you money.

Working with a broker could also make it easier for you to qualify for new-home financing.

Some lenders have a lower tolerance for risk and impose stricter requirements on borrowers, while others tend to be more flexible. A home builder’s preferred lender might be on the more conservative end of this spectrum, imposing strict standards for credit scores, down payments, debt levels, etc.

By working through a California mortgage broker, you could have an easier time qualifying for a new construction loan.

2. Specialized loan types

Many home builders in California offer a standard new-home construction loan and little else. So you might not have a lot of options when it comes to the structure or features of your loan.

A California mortgage broker like Bridgepoint Funding can connect you with various loan options, some of which might be a better fit for you.

Depending on your specific needs and financial situation, you might want to use a conventional loan with a larger down payment, an FHA loan with a smaller upfront investment, and adjustable mortgage with a lower initial interest rate, etc.

Every borrower has different needs when it comes to financing for new construction. It’s not a one-size-fits-all situation. The loan product should be tailored to the individual borrower, to ensure their long-term success. That’s another benefit of working with a mortgage broker to obtain construction financing in California.

3. Competitive rates and terms

In addition to having access to more types of loans, borrowers working with a mortgage broker could also secure a lower interest rate and more favorable terms.

As mentioned above, a California mortgage broker can shop through multiple lenders to find the best deal and terms for each individual client. If you use the builder’s lender, on the other hand, you might only be presented with one offer and rate, take it or leave it.

4. Personalized guidance and education

If this is your first time having a home built in California, you probably have a lot of questions when it comes to financing. So you want to work with a mortgage company that’s willing to explain all of your options and answers all of your questions.

At Bridgepoint Funding, we work hard to educate our clients (and the general public) about every aspect of the mortgage financing process. We are proud to offer one of the largest collections of home buying and mortgage tutorials geared toward borrowers in California.

We take the time to educate and guide each individual client through the loan process, explaining the different choices along the way. We provide objective advice relating to the pros and cons of different home loan options.

You probably won’t get this kind of educational approach when working with a home builder’s lender to pursue construction financing in California.

Have questions? At Bridgepoint Funding, we love to talk about mortgage financing! And we are happy to answer any questions you have about new construction home loans in California, or anything else covered in this article. Please contact our knowledgeable staff to get started.

Mike Trejo is a Bay Area mortgage broker with 20+ years of knowledge and experience.

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