I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. New construction condo financing involves approval requirements that most buyers don’t know about — talk to me before you sign a purchase agreement. Call (800) 239-1103.
Buying a brand-new condo in California is exciting — but financing one is very different from buying in an established building. New construction condos require new project approvals from Fannie Mae, FHA, or VA, and there are specific rules about presale percentages, owner-occupancy, and phased construction that don’t apply to existing buildings.
What Makes New Construction Condos Different
Established condo buildings have a track record — you can review HOA financials, check occupancy ratios, and verify reserve fund levels. New construction doesn’t have any of that history. Lenders compensate by requiring a different type of project approval: the developer must apply for new project approval through Fannie Mae, Freddie Mac, FHA, or VA; the building must meet presale requirements before conventional loans are available; and phased construction projects have additional rules about what percentage of the building is complete.
Presale Requirements: How Many Units Must Sell First?
| Loan Type | Presale Requirement | Notes |
|---|---|---|
| Conventional (Fannie Mae) | 50% of units sold or under contract | For attached condos; lower for detached |
| Conventional (Freddie Mac) | Similar to Fannie Mae | Varies by project type |
| FHA | 50% sold or under contract | Must be in HUD-approved project |
| VA | Varies; VA approval required | Can be initiated by lender |
| Portfolio/Non-QM | Often 30–40% | More flexible, higher rates |
Financing During Construction: Reservation Deposits and Builder Incentives
When you buy a new construction condo, you typically sign a Purchase and Sale Agreement with the developer and pay a reservation deposit (usually 5–10% of the purchase price). This holds your unit while construction continues. You don’t get a mortgage until the building is complete and the certificate of occupancy is issued — your mortgage only funds at closing, usually 30–90 days before move-in.
Many developers offer builder incentives — rate buydowns, closing cost credits, or design center upgrades. These can be valuable but have income and LTV implications for your mortgage. Make sure I know about all incentives before you lock your rate.
New Construction Condo Approval Process (Conventional Loans)
For Fannie Mae and Freddie Mac, new construction condos go through a New Project Approval process. The developer or lender submits project documentation including project legal documents (CC&Rs, bylaws, declarations), construction plans and specifications, presale evidence (signed purchase agreements), budget and HOA documents, and insurance documentation. Once approved, the project is added to Fannie Mae’s Condo Project Manager (CPM) database, making financing easier for subsequent buyers.
New Construction FHA Condo Loans
FHA has a separate approval process for new construction condos through HUD. The developer typically applies during the construction phase to get the building on the FHA-approved condo list before units are ready to sell. This can take 2–4 months, so buyers planning to use FHA financing should confirm the building is on the list — or expected to be — before signing a purchase agreement.
VA Loans for New Construction Condos
VA loans are available for new construction condos if the building receives VA approval. The VA has its own review process separate from Fannie/Freddie/FHA. If a building isn’t VA-approved, the lender (with veteran’s authorization) can submit the project — but plan for 60–90 days if VA approval isn’t already in place.
Phased Construction Projects
Large California developments often build and sell in phases. Early phases often require builder financing or non-QM loans since presale minimums aren’t met yet. Later phases have more financing options as the project matures and owner-occupancy establishes. Large projects with master association structures add complexity to lender review — watch for these when evaluating phased developments in the Bay Area and Southern California.
New Construction Condo Red Flags
Large investor or rental concentrations can sink owner-occupancy requirements if a developer sells too many units to investors before owner-occupants. Developer-controlled HOAs during construction are scrutinized for budget adequacy and reserve funding. Underfunded reserves from day one can trigger Fannie Mae review concerns. Some lenders won’t fund until 100% of the building is complete — confirm your lender’s policy before signing.
Tips for Buyers Financing New Construction Condos in California
Get pre-approved early — new construction timelines shift, and a pre-approval gives you a head start when your unit approaches completion. Check project approval status — ask the developer if the project is Fannie Mae, FHA, or VA approved before signing. Understand rate lock timing — new construction closing dates often shift 30–90 days; know your lender’s rate lock extension policies. Compare builder financing to outside financing — I can frequently match or beat the builder’s preferred lender rate. Know your exit strategy — if you need to sell before the building meets conventional presale requirements, your buyer pool is limited to cash buyers and non-QM borrowers.
Related: California Condo Mortgage Guide | Non-Warrantable Condo Loans | SB-326 Condo Mortgage | HOA Litigation & Condo Financing
Frequently Asked Questions — New Construction Condo Financing California
Can I use a conventional loan to buy a new construction condo in California?
Yes, but the building must first receive new project approval from Fannie Mae or Freddie Mac, and at least 50% of the units must be sold or under contract before most conventional lenders will fund individual unit loans. Before signing a purchase agreement on a new construction condo in California, ask the developer whether the building has received or applied for Fannie Mae/Freddie Mac new project approval. If not yet approved, you may need to use portfolio or non-QM financing at higher rates until the project is approved and the presale threshold is met.
When do I get my mortgage on a new construction condo?
Your mortgage does not fund until the building receives a certificate of occupancy and you close on your unit — typically 30–90 days before your scheduled move-in date. Until then, you hold a purchase contract and reservation deposit, not a loan. The developer finances the construction with their own construction loan. Your mortgage only comes into play at the final closing. Rate lock timing is a critical planning consideration on new construction — if your closing date shifts, you may need a rate lock extension, which has a cost.
Should I use the developer’s preferred lender or find my own mortgage?
Always compare. Developer preferred lenders often offer attractive incentives (rate buydowns, closing cost credits, design upgrades) to steer buyers their way. These can be genuinely valuable — but the rate and fees may not be competitive. An independent mortgage broker can shop multiple lenders and often match or beat the preferred lender’s rate while you still receive the builder’s incentives. The key is to get the independent quote before you commit to the preferred lender — some builder incentive agreements require you to close with them. Read the fine print on any incentive offer carefully.
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
