Ground-Up Construction
Money for the land and the build, released as you build
A construction loan funds a project that does not exist yet. It is underwritten on the plans, the budget and what the finished building should be worth — and the money arrives in stages, as the work does.
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Your details
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So we can send your options and answer questions.
We save your details as soon as you continue, so you never have to start over.
How a construction loan works
The loan is sized against two things: the total cost of the project — land, hard costs, soft costs, contingency — and the finished value once it is built. As with a flip, each lender caps against both and the lower cap governs.
Funding is released in draws. You or your builder complete a stage, an inspector verifies it, and that portion is released. Nobody hands over the full build budget at closing, and a lender will want a line-item budget and a schedule before the first draw.
During construction you generally pay interest only on what has actually been drawn, not on the whole loan. When the building is finished it is either sold or refinanced into permanent financing — and lenders want to see which of those is the plan before they start.
What lenders actually look at
Builder experience
Completed projects of similar size and type, by you or by your general contractor. This is weighted heavily on ground-up.
Plans and permits
How far along the approvals are. A shovel-ready project with permits in hand is a different file from a concept.
The budget
A line-item cost breakdown with a contingency. Lenders test it against what the work should actually cost in that market.
Finished value
Supported by comparable sales or, for income property, by projected income. This sets the ceiling on the loan.
Your contribution
Land equity and cash into the project. Construction lending expects real skin in the game.
The exit
Sale or permanent refinance, and whether the numbers work at the end of the term.
Questions we get asked
Can the land purchase be included?
Often, yes — many programmes fund land and construction together, subject to the lender's cap on total cost. Land you already own can count as your equity contribution.
Do I need a licensed general contractor?
Most lenders require one, and will review their licence, insurance and track record. Owner-builder programmes exist but are considerably rarer.
How do draws work?
You complete a stage, request a draw, an inspection verifies the work, and funds are released. The number of draws and the inspection process are set by the lender.
Do I pay interest on the whole loan from day one?
Usually not. Interest is typically charged on the balance drawn to date, so the payment grows as the project does. Confirm this with the specific lender.
What happens if the build runs over budget?
The contingency is meant to absorb it, and beyond that the shortfall is generally yours to cover. This is why lenders test the budget before funding rather than after.
What if I want to keep the property?
Then the exit is a refinance rather than a sale, usually into a long-term loan such as a DSCR loan on a rental. Plan the takeout before you start.
How much can be financed
The highest figures published by the 1 cited lenders on our desk for this product. Whichever cap is lowest for your deal is the one that applies.
Up to
95%
Of total cost
purchase plus renovation
Up to
80%
Of current value
on a refinance
These are maximums, not what everyone gets: the top of a range is reserved for the strongest files, and what is available depends on the lender, the property, your experience and your credit. This is not an offer — terms are set by a lender in writing after underwriting.
Who this page is for
- Builders and investors putting up a new home or small development.
- Owners building on land they already hold.
- Investors taking a property down to the studs rather than refreshing it.
- Developers of small multifamily or mixed-use.
- Anyone whose project is too heavy for a standard rehab loan.
What this financing covers
- The land, where it is being bought as part of the project.
- Horizontal work — clearing, utilities, site preparation.
- The build itself, released in stages as work is completed.
- A gut renovation that goes beyond cosmetic work.
- Soft costs: plans, permits, engineering, where the lender allows.
- Interest carried during construction, on some structures.
The words you will hear, in plain English
Construction lending has more moving parts than any other product on this site. These are the ones that decide how a project runs.
- Draw schedule
- The plan for releasing money in stages as work is completed. It is agreed up front and it governs your cash flow for the whole build.
- Inspection
- Someone visits and confirms the stage is genuinely finished before the next draw is released. Budget the time for it.
- Reimbursement
- Most draws pay you back for work already done and paid for. You carry the cost first — which is the single biggest surprise for first-time builders.
- Hard costs
- Materials and labour. What most people mean when they say the build budget.
- Soft costs
- Plans, permits, engineering, surveys, legal. Real money, often a substantial share, and not every lender funds all of it.
- Contingency
- A reserve inside the budget for what goes wrong. Lenders expect one; projects without one stall.
- Interest reserve
- Interest during construction, funded from the loan rather than paid from your pocket. Not every structure includes it.
- Certificate of occupancy
- The document saying the building may be lived in or used. Your exit usually cannot complete until it exists.
- Retainage
- A share of each payment held back until the work is finished and accepted.
- Takeout loan
- The permanent financing that repays the construction loan when the building is done.
How these are usually put together
Illustrative structures, to show how construction files are assembled and what a lender weighs. Not offers, not quotes, and not terms available to anyone in particular — figures and structures vary by lender and by project.
Land plus build, one loan
A builder buying a lot and putting up a house. The land funds at closing and the build releases in draws against a schedule agreed before anyone breaks ground.
Building on land already owned
Where the land is owned free and clear, its value can count toward the equity in the project. That often makes the file considerably easier.
A gut renovation
Down to the studs, new systems throughout. Heavy enough that a standard rehab loan does not fit, so it is underwritten like a build.
Build to rent, not to sell
The exit is a DSCR or permanent loan rather than a sale. Lenders want to see the takeout is realistic before they fund the build.
What to prepare
Construction files are the most document-heavy we arrange, and the ones where preparation most obviously shortens the timeline.
- Plans and specifications
- A line-by-line budget — not a round number
- The builder's contract and the builder's own history
- Permits, or evidence of where they stand
- The purchase contract, or proof you own the land
- A realistic build schedule
- Comparable finished values in the area
- Your track record on previous projects
- Entity papers: articles, operating agreement, EIN letter
- Proof of funds for your contribution and the contingency
- Builder's risk insurance quote
- Your exit plan — sale, or the permanent loan that takes it out
From application to certificate of occupancy
- 1
The project
What you are building, where, on what land, and what it will be worth finished.
- 2
The budget and the schedule
Line by line. A round number is the fastest way to a slow file.
- 3
The builder
Who is doing the work, and what they have finished before. On a construction loan the builder is underwritten too.
- 4
Underwriting and appraisal
The property is appraised on completed value, against plans rather than what stands there today.
- 5
Closing
The land portion funds, the draw schedule is set, and the build begins.
- 6
Draws
Work, inspection, reimbursement — repeating through the build. Your own cash carries the gap between doing and being paid.
- 7
Completion and exit
Certificate of occupancy, then the sale or the permanent loan that repays the construction financing.
What goes wrong
Not planning for reimbursement
Draws usually pay you back for work already done. If you cannot float a stage, the build stops between draws.
A budget with no contingency
Something always costs more. A project without a reserve turns a $15,000 surprise into a stalled site.
Underestimating the schedule
Permits, weather and trades all slip. An optimistic timeline costs you in carrying interest.
A builder with no record
The lender is underwriting them as well as you. A builder who cannot show finished work is a problem in the file.
Ignoring soft costs
Plans, permits, engineering and surveys are real money, and not every lender funds all of them.
No exit before you start
Sell to whom, or refinance into what? Decide before you break ground, not at certificate of occupancy.
Related financing
Tell us about the project
Four short steps. Land cost, build budget and finished value are what matter most.
Step 1 of 5
Your details
Where can we reach you?
So we can send your options and answer questions.
We save your details as soon as you continue, so you never have to start over.
This is not an offer and not an approval. Terms are set by a lender, in writing, after underwriting, and vary by lender, by property and by file.
Planning a build?
Send the site, the budget and the finished value. We will tell you which lenders on our desk write projects like it.