New construction financing

Ground-Up Construction Loans

Build from the ground up with structured draws tied to construction milestones.

Speak to a loan officer See pricing scenarios

Ground-up construction loans are designed for investors and developers building new properties from scratch. Unlike renovation loans, these start with raw land or a teardown and finance the entire construction process through a draw schedule tied to project milestones. They are more complex than other investor loans, but they unlock opportunities that existing inventory cannot.

Typical terms

Loan-to-cost

Up to 85% LTC

Term

18-24 months

Draws

Milestone-based disbursements

Property types

SFR, townhome, multifamily, mixed-use

Permits

Required before funding

Experience

Preferred but not always required

How construction draws work

The lender does not fund the entire construction budget upfront. Instead, funds are released in stages as work progresses. After each milestone (foundation, framing, rough mechanicals, etc.), the borrower requests a draw, the lender sends an inspector, and the next tranche of funds is released.

This protects both the lender and the borrower by ensuring funds are only deployed as value is being created.

What you need before applying

Lenders underwrite the project as much as the borrower. A strong budget, experienced builder, and realistic timeline all improve the chances of approval and favorable terms.

•Approved building permits or a clear path to obtaining them
•A detailed scope of work and construction budget
•A general contractor or builder with a track record
•Plans and specifications
•A clear exit strategy: sell or refinance upon completion

Exit strategies for new construction

Most ground-up borrowers either sell the completed property or refinance into a long-term loan (like DSCR) if the property will be held as a rental. Having a clear exit plan before starting construction is important because the loan term is finite and the lender will want to see a realistic path to repayment.

Learn more

Guides related to ground up construction loans

Why an Investment Loan Pricer Changes Deal Velocity

Investors need scenarios, not single quotes. Here is how a loan pricer compares DSCR vs bridge, estimates cash-to-close, and moves deals faster.

What an Investor Lending CRM Should Actually Handle

Investor lending needs deal tracking, pricing, and document management, not just contacts. Here is what a real lending CRM should handle.

What a Mortgage LOS Should Do for Investor Lending Teams

Most LOS platforms are built for retail mortgages. Investor lending needs borrower portals, milestone tracking, and execution visibility across DSCR, bridge, and construction files.

FAQ

Ground-Up Construction Loans FAQs

Common questions about this financing option.

Do I need permits before applying for a construction loan?

Most lenders require approved permits or evidence that permits are in progress before they will fund. Some will underwrite the deal while permits are pending, but they will not release funds until permits are in hand.

Can a first-time builder get a construction loan?

Some lenders offer programs for less experienced builders, though they may require a larger down payment, a licensed GC, or additional reserves.

What happens if construction goes over budget?

Cost overruns are common in construction. Having a contingency reserve (typically 5-10% of the budget) and clear communication with your lender can help manage overages without derailing the project.

For investors