Ground-Up Construction Loans
Capital structured around plans, budgets, draws, and a build timeline — for investors and builders taking a site from raw land or a teardown to a finished, marketable asset. A construction loan is not a rehab loan with a longer clock. It is underwritten to the completed building, funded against verified progress, and governed by a draw schedule that protects both sides while the work is in the ground.
Below is exactly how the draw schedule works, what a fundable construction file contains, how the project is evaluated, and the specific conditions that tell us a build is not ready for this structure yet.
Construction leverage, interest reserve, term, and rate are confirmed against the current program sheet before any commitment. Business-purpose, non-owner-occupied transactions only. Subject to plans, budget, valuation, builder qualification, underwriting, and final approval.
The Terms at a Glance
Published parameters, not marketing ranges. Where a figure is still being confirmed against the current program sheet, it says so rather than guessing — construction leverage is deal-specific and always tied to the completed valuation and the budget.
- Use of funds
- New construction and major structural rebuilds — land or lot, hard costs, and eligible soft costs on a defined build plan
- Maximum leverage
- {{CLAIM:construction.max_ltc}} — confirming against current program sheet
- Basis of underwriting
- The completed, as-built value supported by plans, specifications, and comparable sales — not the value of the dirt today
- Funding method
- Land or acquisition portion at closing; construction budget released in draws against verified completed work
- Number of draws
- {{CLAIM:construction.draw_count}} — confirming; scaled to the build's milestones
- Interest reserve
- {{CLAIM:construction.interest_reserve}} — confirming; whether carry is reserved from proceeds is deal-specific
- Term
- {{CLAIM:construction.term_range}} — confirming; sized to the build schedule plus a lease-up or sale window
- Rate & points
- {{CLAIM:construction.rate_range}} — confirming against current program sheet
- Builder experience
- {{CLAIM:construction.builder_experience}} — confirming; a licensed, credible general contractor is weighed heavily
- Exit
- Sale of the finished asset or a permanent / DSCR refinance takeout — the exit is underwritten up front, not assumed
- Markets
- Cleveland, OH and Fort Lauderdale / South Florida
Every quantitative figure above marked "confirming" is governed by the program sheet and confirmed in writing before you commit. We do not publish a construction leverage number we cannot stand behind on your specific build.
Who It Is For
Ground-up construction is the right structure for a specific kind of project and a specific kind of operator — one who controls a buildable site, has a real set of plans, and can put a credible builder in charge of executing them.
- Investors developing infill lots in established, comparable-rich neighborhoods
- Builders and builder-investors adding spec homes to an active pipeline
- Operators replacing a functionally obsolete structure with new, higher-value product
- Small-scale developers taking down two-to-four-unit new construction to hold or sell
- Experienced flippers moving up from heavy rehab into their first from-the-slab build
Common Scenarios
- A vacant lot acquired at basis with plans already through, or near, permitting
- A teardown where the land plus vertical cost lands well inside the finished value
- A new-build in a market where comparable new construction is selling, not sitting
- A builder with a proven crew scaling from one project to several at once
How the Project Is Evaluated
A construction file is underwritten forward — to the building that does not exist yet — so the review concentrates on whether the plan, the budget, and the builder can reliably produce the value the whole structure rests on.
- As-completed value. Comparable sales of finished product the appraiser will support, not a projection
- Budget integrity. A line-item hard-cost budget by trade with a real contingency, not a per-square-foot round number
- Builder capability. License, track record, and whether this crew has built this product before
- Site readiness. Zoning, permits, utilities, and a clear path to breaking ground
- Schedule realism. A timeline the trades can actually hit, with weather and inspection lag built in
- Exit credibility. A sale price the market supports or a refinance that genuinely underwrites at completion
Documentation
- Plans and specifications — the scope the appraisal and budget both key to
- Line-item construction budget — hard costs by trade, plus soft costs and contingency
- Builder / GC agreement and license — who is building it and on what terms
- Lot control — purchase contract, deed, or evidence of ownership
- Permitting status and comparable sales supporting the completed value
- Entity documents and a build-focused experience summary
Not sure your numbers hold together yet? Build the scope first with the construction budget guide, then pressure-test the renovation-style line items with the rehab budget worksheet before you submit.
How Construction Funds Actually Release
This is the mechanism that separates a construction loan from every other program. Capital does not arrive in a lump sum. It is released in stages, each one tied to work that has been completed and verified — so the money in the ground always matches the value in the ground.
| Stage | Work verified before release | Why it gates the next draw |
|---|---|---|
| Closing | Land / lot or acquisition portion funds; construction budget is committed but not yet disbursed | Capital is in the dirt you control before any vertical spend |
| Foundation | Site work, footings, and foundation poured and inspected | The most failure-prone stage is confirmed before framing dollars flow |
| Framing / dry-in | Structure framed, roofed, and weather-tight | The building exists and is protected before interior trades begin |
| Mechanicals | Rough plumbing, electrical, and HVAC installed and inspected | Systems pass inspection before they are closed inside the walls |
| Finishes | Insulation, drywall, interior and exterior finishes substantially complete | The value-adding finish work is confirmed before final funds release |
| Completion | Certificate of occupancy, final inspection, and punch list cleared | The asset is finished, valued, and ready for its underwritten exit |
Reading the schedule
Each draw follows the same loop: your builder completes a stage, requests a draw, the completed work is verified — typically by inspection or a progress report — and funds release for that stage. The next stage cannot draw until the current one is confirmed. That discipline is exactly why a construction lender can fund a building that does not exist yet: the capital never gets ahead of the collateral. It also protects you, because a stalled or off-budget project surfaces at a draw, not at the end.
The interest reserve, when a build carries one, works alongside the draw schedule. Rather than requiring monthly carry out of pocket while the property produces no income, a portion of the loan may be reserved to service interest during construction — {{CLAIM:construction.interest_reserve}}, confirming against current program sheet. Whether your build uses a reserve, and how it is sized, is set before closing. The number of draws, the inspection method, and release timing are all confirmed on the program sheet: {{CLAIM:construction.draw_count}} — confirming.
What a Construction Budget Looks Like
An illustrative project cost stack. These are borrower-side example inputs — the numbers you bring to the file — shown to make the structure concrete. The leverage RECR extends against them is confirmed on the program sheet, never assumed.
| Lot / land basis | $70,000 | Acquired or owned, at true basis |
|---|---|---|
| Hard costs (build) | $240,000 | Line-item by trade — the draw budget |
| Soft costs & permits | $22,000 | Plans, permits, engineering, fees |
| Contingency | $18,000 | Roughly 5–7% of hard cost — required, not optional |
| Total project cost | $350,000 | The basis leverage is measured against |
| As-completed value | $470,000 | Supported by finished-product comparables |
| Capital structure | {{CLAIM:construction.max_ltc}} | Confirmed on program sheet — never invented here |
Notice the two numbers that carry the whole file: total project cost and as-completed value. The wider and better-supported the spread between them, the more resilient the build is to an overrun, a slow permit, or a soft selling season. A budget with no contingency, or a completed value propped up by optimistic comps, is where construction files fail — and it is what a careful underwriter looks for first.
Step-by-Step Process
Preliminary review
Send the lot, the plans or scope, your hard-cost budget, and your as-completed value support. Enough for a first read on fit.
Feasibility screen
We test total project cost against defensible completed value and sanity-check the budget and schedule. Most builds are confirmed or redirected here.
Structure & draw plan
If the economics support it, we walk through leverage, the interest reserve, the draw milestones, and the inspection process.
Full file & underwriting
Plans, appraisal, budget review, builder qualification, and entity structure move through the applicable process.
Close & build
Land or acquisition funds at closing. Construction releases in draws against verified completed work through to completion.
When This Path Does Not Fit
We would rather tell you at feasibility than after you have carried a stalled lot for three months.
- No plans or permits in motion. A concept is not a project. There has to be a real scope to build a budget and a draw schedule around
- As-completed value unsupported by comps. If finished product is not selling near your target, the exit is a guess
- No line-item budget or no contingency. A per-square-foot estimate is not a construction budget
- No credible builder. An unproven crew on a full ground-up is a hard conversation
- Site not buildable. Zoning, utilities, or access problems that have not been solved yet
- Owner-occupied intent. Business-purpose, non-owner-occupied construction only
If ground-up is not the right fit today, that does not end the conversation. A build that is not ready may be a strong bridge or fix-and-flip candidate instead. Compare all programs.
Questions About Ground-Up Construction
How is a construction loan different from a rehab loan?
A rehab loan improves an existing structure; a construction loan builds one from the ground. Construction is underwritten to the completed, as-built value, carries a longer term to match the build schedule, and releases funds through a milestone draw schedule tied to inspections rather than a single rehab escrow. The discipline is tighter because the collateral does not fully exist until the work is done.
How much of my construction budget will you fund?
Construction leverage is deal-specific — it depends on your total project cost, the supported as-completed value, and the builder's track record — and it is confirmed on the current program sheet before any commitment: {{CLAIM:construction.max_ltc}}, confirming. We will not publish a leverage number we cannot stand behind on your specific build.
How do construction draws work?
Funds release in stages against verified completed work. Your builder finishes a milestone — foundation, framing, mechanicals, finishes — requests a draw, the work is confirmed by inspection or progress report, and money releases for that stage. The next draw cannot fund until the current stage is verified, which keeps the capital in step with the value in the ground.
Do I need a licensed general contractor?
A credible, licensed builder is weighed heavily, and on a full ground-up it is close to essential. Whether an owner-builder arrangement is possible depends on the scope and your demonstrated construction experience: {{CLAIM:construction.builder_experience}}, confirming. The builder is part of what underwriting is approving, not an afterthought.
What is an interest reserve and will my loan have one?
During construction the property produces no income, yet the loan still accrues interest. An interest reserve sets aside a portion of proceeds to service that carry so you are not paying it out of pocket while building. Whether your build uses one, and how it is sized, is deal-specific: {{CLAIM:construction.interest_reserve}}, confirming.
Can I fund the land purchase and the build together?
Often, yes — the lot or acquisition portion funds at closing and the construction budget releases in draws thereafter. The stronger your lot basis relative to completed value, the more room the structure has. If you already own the lot, that equity typically strengthens the file.
What term do construction loans carry?
Term is sized to your build schedule plus a window to sell or refinance at completion, and it is confirmed on the program sheet: {{CLAIM:construction.term_range}}, confirming. A realistic schedule matters — an aggressive timeline that slips creates carry pressure the exit has to absorb.
What happens at completion?
Once the certificate of occupancy and final inspection are in hand, the asset is finished and ready for its underwritten exit — a sale or a permanent / DSCR refinance takeout. That exit is reviewed up front, not left to chance. For the hold path, see rental / DSCR financing.
Can a first-time builder use this program?
It is possible with the right team and the right project — a straightforward build, a proven general contractor, a supported completed value, and a real budget. Experience is a risk factor, not an automatic disqualifier. A first-time developer pairing with a strong builder is a more straightforward file than a solo operator attempting a complex build alone. See first-time investors.
How fast can a construction loan close?
Timing depends on file completeness, the appraisal of an as-yet-unbuilt property, and permit status. A complete file — plans, a clean line-item budget, a qualified builder, and supported comps — moves substantially faster than one still chasing permits: same-day approval on a complete submission, then funding in 3–5 business days.
Does submitting a deal guarantee funding?
No. Submission begins a review. All financing is subject to plans, budget, valuation, program availability, underwriting, property eligibility, borrower and builder qualification, and final approval.
Have a Build Ready to Price?
Send the lot, the plans or scope, your hard-cost budget, and your as-completed value support. That is enough for a first read on whether ground-up construction financing fits.