Ground-Up Construction Loans for Investors

A ground-up construction loan can cover land acquisition and approved hard construction costs, with 100% of build costs funded within the program's overall 85% total LTC limit. The total structure must also remain within the applicable value cap and other underwriting requirements.

Land proceeds are generally available at closing according to the approved structure. Construction proceeds are held for the project and released through draws as eligible work is completed. Hard costs can include labor and materials tied directly to the approved plans and budget. Items outside the approved scope or unsupported cost increases remain the borrower's responsibility.

The loan is not an unrestricted construction account. Plans, budget categories, inspections, documentation, and draw controls connect each release to verified progress. Closing costs, points, reserves, carrying costs, and soft costs are addressed separately according to the final structure.

Ground Up Construction financing is available at 85% total LTC, with a maximum loan amount of $5M and a maximum ARLTV of 70%, subject to underwriting. Total LTC compares the loan with the supported land and construction cost, while ARLTV compares the loan with the appraised completed value.

Both limits apply, and the lower supported result can control proceeds. The final amount also reflects the appraisal, borrower contribution, liquidity, plans, budget, contractor information, location, project complexity, and exit. A higher budget does not automatically create a larger loan if value or another underwriting factor does not support it.

Investors should build a complete sources-and-uses plan before closing. It should account for land, construction, professional costs, carrying expenses, reserves, financing costs, and contingency resources so the project is not dependent on every assumption staying unchanged.

A strong application presents a buildable project, a credible team, and a practical exit. Be ready to provide permits or a clear permit path, plans and specifications, a line-item budget, general contractor information, a construction timeline, land details, and the proposed sale or refinance strategy.

The plans and budget should tell the same story. Underwriting looks at whether costs fit the design and local market, whether the team can execute, and whether the completed value supports the request. Contractor experience, bids, insurance, licensing where applicable, and responsibility for project management help establish execution capacity.

New builders are welcome under the current program. That does not remove the need for a qualified plan and support team. Relevant construction, development, real estate, or project-management experience may help provide context, while exact requirements and terms are confirmed per deal.

Construction draws reimburse eligible work after progress is documented and inspected. At closing, approved build funds are reserved rather than released as unrestricted cash. The borrower completes an agreed stage, submits a draw request with supporting records, and schedules an inspection.

The inspection compares completed work with the approved plans, budget, and draw schedule. Once eligible progress is confirmed, the supported amount is released. This process repeats through construction, creating a record of work completed and funds advanced.

Accurate invoices, lien documentation, change orders, photos, and schedule updates help draws move efficiently. Material scope or cost changes should be raised promptly. Approval of the original budget does not mean the loan automatically increases when labor, materials, design, or site conditions cost more than expected.

Our guide on how rehab draws work walks through the request, inspection, and release steps.

Ground Up Construction rates are starting at 10.00%, subject to underwriting, with origination starting at 2.00% and a 12 to 18-month term. Construction funds follow a draw schedule based on progress.

Actual pricing and structure depend on leverage, value, location, plans, budget, project complexity, borrower liquidity, experience, contractor strength, and exit. The approved term should fit a supportable construction schedule and leave a realistic path to sale or refinance.

Interest treatment, reserves, draw conditions, extensions, recourse, and payoff requirements are confirmed in the final loan documents. A quote should be evaluated against the full project timeline and capital needs, not only the starting rate or origination charge.

A build-to-sell project repays the construction loan from a completed-property sale, while a build-to-rent project plans to replace construction debt with long-term rental financing. Each exit requires support before construction begins.

For a sale, evaluate completed value, buyer demand, marketing time, carrying costs, and the effect of a slower disposition. For a rental, evaluate achievable rent, operating costs, property readiness, and whether future debt service fits the stabilized income.

Construction approval does not assure the eventual sale price or refinance. The permanent financing request is separately underwritten. Conservative assumptions and sufficient liquidity can help protect the project when schedules, costs, values, or market conditions change.

The DSCR loan program may provide a long-term refinance path for an eligible completed rental.