Up to 85-90% of cost · 70% of completed value
Ground-up construction loans for spec and infill homes
Land plus the whole build budget for a 1-4 unit infill, tear-down or spec home. The loan stops at 85% of cost and 70% of what the finished home appraises for.
Ground-up construction loan terms
| Use | Build-ready infill lots, tear-downs and spec homes. Not tract homes or subdivisions of 10+ homes. Mid-construction loans available |
|---|---|
| Property types | Non-owner-occupied 1-4 unit homes, townhomes, condos |
| Loan amount | $50,000 to $3,000,000 |
| Land | Up to 75% of the lower of land value or purchase price (60% until plans are permitted); raised to 75% by a catch-up draw once permits are approved |
| Construction | Up to 100% of the construction budget, in draws |
| Cap on total loan | 85% of total project cost (90% for builders with 3+ similar projects), and 70% of completed value |
| Term | 12 months, up to 18 (up to 24 for experienced builders) at the lender's discretion |
| Experience | 1-2 prior ground-up builds (a general contractor's permitted builds can count). Builders with 3+ similar projects can finance up to 10 homes at once |
| Interest reserve | At least 1 month |
| Borrower | Full recourse |
| Foreign nationals | Eligible |
| Not eligible | Mixed use, 5+ units, condotels, co-ops, rural, log homes, farms, vacation rentals |
| Minimum FICO, points | Not published; quoted per project |
Two caps, and the lower one wins
A construction loan here is sized twice. First on cost: land, hard costs and soft costs added up, and the loan can reach 85% of that total (90% if you have finished three or more similar builds). Then on value: the appraiser's estimate of the finished home, and the loan can reach 70% of it. Your equity is the difference between total cost and the smaller of those two numbers.
Worked example. A $140,000 infill lot, a $420,000 build and $45,000 of plans, permits and fees: $605,000 all in. 85% of cost is $514,250. The finished home appraises at $860,000, and 70% of that is $602,000. Cost binds, so the loan is $514,250 and you bring $90,750, which can be land you already own free and clear.
How the money moves
- Closing. The land advance funds, up to 75% of the lower of land price or value (60% if the plans are not yet permitted). At least one month of interest is set aside as a reserve.
- Permits. Once plans and permits are approved, a catch-up draw brings the land advance up to 75%.
- Draws. You request a draw as each stage is finished. Draws reimburse completed work, and you can take as many as you need, when you choose.
- Completion. Sell the home, or refinance into a 30-year DSCR rental loan once it is leased.
Term
Twelve months as standard. The lender can extend to 18 months on the standard program and to 24 months for experienced builders. Price the schedule honestly: permits and inspections, not framing, are what usually push a build past its term.
Run your numbers
Builds24.9% margin
Loan you can size to
$514,250
Capped by cost. You bring $90,750 in cash or land equity.
- Total project cost
- $605,000
- Loan-to-cost
- 85.0%
- Loan-to-completed-value
- 59.8%
- Toward land at closing
- $49,250
- Construction draws
- $465,000
- Your equity in
- $90,750
- Points
- $10,285
- Interest over the build
- $30,993
- Margin after loan costs
- 24.9%
Interest assumes draws arrive evenly over the build. The lender also holds back at least one month of interest as a reserve, and limits the land advance to 75% of the lower of land price or value (60% until permits are approved).
Questions people ask
Will the loan pay for the land?
Part of it. The land advance is up to 75% of the lower of the land price or its value. If the plans are not yet permitted, it starts at 60%, and a catch-up draw lifts it to 75% once permits are approved after closing.
How much of the build is funded?
Up to 100% of the construction budget, paid in draws as the work is completed, as long as the whole loan stays within 85% of total project cost (90% for experienced builders) and 70% of the appraised completed value.
Do I need to have built before?
Usually one or two prior ground-up builds. A general contractor's permitted builds can count toward that. A guarantor with no experience can be considered case by case, and can join a deal alongside an experienced guarantor.
Can I build more than one house on one loan?
One or two homes on the standard program. Builders with three or more similar projects can finance up to ten at once.
What about a project that is already started?
Mid-construction loans are available, which can take out an existing lender or fund the rest of a stalled build.
What cannot be built with this loan?
Tract homes or subdivisions of ten or more homes, 5+ unit buildings, mixed use, condotels, co-ops, rural sites, log homes, farms and vacation rentals.
Have a deal under contract?
Send the numbers. We will tell you plainly whether it fits and what the loan looks like.