Ground-up construction loans
Last updated
A ground-up construction loan for investors funds new 1–4 unit homes built to sell or rent. Lenders typically lend part of the land cost and most or all of the construction budget, released in draws as work is inspected, and size the loan by land, total cost and the completed value. Terms usually run 12 to 24 months.
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How construction loans are sized
Lenders combine a land LTC (a percentage of the land price or value), a maximum loan-to-cost on land plus construction, and a maximum loan-to-completed-value (ARV). The lowest wins. Builders with more completed homes usually get higher limits.
Draws and inspections
The construction budget is funded in stages (foundation, framing, dry-in, rough-ins, finishes) after inspections. Draw fees and the time between draws affect your cash needs. Try the draw schedule calculator.
Plans, permits and the builder
Expect lenders to ask for plans, a detailed budget, permit status, the builder’s or GC’s license and experience, and a timeline.
Term length
Builds often need 12 to 18 months, so check which terms a lender offers. Fewer lenders offer 18 or 24 months, and some charge more for longer terms.
Ground-up construction loans by state
Related tools and guides
Frequently asked questions
How much do ground-up construction lenders lend?
Commonly 65–80% of the land cost and up to 100% of the construction budget, capped at about 80–90% of total cost and 65–75% of the completed value, depending on experience and credit.
Do I need to own the land?
No. Many lenders finance the land purchase and construction together. If you already own the land, its equity can count toward your contribution.
Can a first-time builder get a construction loan?
It’s harder. Lenders usually want to see completed builds or a licensed, experienced general contractor on the project. Some lenders don’t lend to first-time builders at all.
How long are ground-up construction loans?
Usually 12 to 24 months, interest-only, sometimes with extension options for a fee.
Is interest charged on the full construction budget?
Only if the lender charges Dutch interest. Many charge interest only on funds drawn. See Dutch interest explained.