Investment lending education

Ground-Up Construction 101: Everything a Broker Needs to Know

Ground-up construction is the most complex product in investor lending, and the most rewarding when done right. This course covers construction phases, LTFC calculation, permit and plan requirements, general contractor agreements, draw schedules, interest reserves, and how experience tiers affect everything.

Beginner 10 min 2 lessonsLoan ProgramsUpdated 2026-03-14

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Curriculum

1 modules, 2 lessons

Module 1GUC Fundamentals

1Building From ScratchReading

2GUC QuizQuiz

How ground-up construction loans work

Ground-up construction (GUC) loans finance building a property from the ground up, from land acquisition through completed construction. Unlike fix and flip or bridge loans, GUC deals involve approved plans, permits, general contractor agreements, and a draw schedule tied to construction milestones.

The key metric is LTFC (loan to full cost), which includes land, hard costs, soft costs, permits, and contingency. Lenders evaluate the total project budget, borrower experience, and the feasibility of the build before committing capital.

What this course covers

GUC 101 provides the foundational knowledge every broker needs before originating a construction loan.

•Construction phases: from pre-development through certificate of occupancy
•LTFC calculation: how lenders evaluate total project cost and loan sizing
•Permits and plans: what must be in place before a lender will fund
•GC agreements: general contractor requirements and what lenders look for
•Draw schedules: how construction funds are released at each milestone
•Interest reserves: prepaid interest that covers the borrower during the build period
•Experience tiers: how completed builds affect pricing and eligibility

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FAQ

Ground-Up Construction 101 FAQs

Common questions about this course topic.

What is LTFC in construction lending?

LTFC stands for loan to full cost. It measures the loan amount relative to the total project cost including land acquisition, hard costs (materials and labor), soft costs (permits, plans, engineering), and contingency reserves.

Do construction loans require approved permits before funding?

Yes. Most GUC lenders require building permits to be issued or at minimum in process before the loan closes. Some lenders will fund land acquisition with permits in progress, but the construction draws will not begin until permits are approved.

How do experience tiers work for construction loans?

Lenders classify borrowers by the number of ground-up projects they have completed. First-time builders face lower leverage and higher rates, while experienced builders with five or more completed projects qualify for the best terms and highest LTFC ratios.

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