Construction Loan Requirements
AAPL Member · Direct Lender Since 2016 · NMLS #1979189
Ground-up construction asks more of a borrower than any other short-term loan, for a simple reason: you’re financing a plan, not a finished asset. There’s no existing structure to appraise — only land, drawings, a budget, and your ability to execute. So a ground-up construction loan is underwritten around the project: the land, the plans, the cost, what the finished property will be worth, and the team that’s going to build it. The requirements below all flow from that. Here’s what it takes to qualify, from a direct lender that’s funded builders since 2016.
Two Numbers That Size the Loan
Most construction loans are governed by two ratios, and your deal has to satisfy both. The first is loan-to-cost (LTC) — we fund up to 90% of total project cost, with you covering the rest through land equity or cash. The second is loan-to-after-completion-value (ARV) — we keep the loan within 75% of what the finished property will be worth. Whichever is tighter sets your loan amount. Meeting both isn’t a formality; it’s the core requirement, because it’s what keeps the project safely financeable from dirt to finish. Run your numbers on the hard money loan estimator before you apply.
The Project Package
This is where construction differs most from every other loan. You’ll need a complete project package: architectural plans, a detailed and realistic construction budget broken down by phase, the permits or a clear path to obtaining them, and a timeline. The loan disburses through a draw schedule tied to construction milestones — foundation, framing, mechanicals, finish work — so a credible, phased budget is literally how the money is structured. A vague or padded budget is the most common reason a construction file stalls.
Land and Equity
You’ll generally bring the lot — either already owned, where your equity counts toward the deal, or acquired as part of the financing, since we can fund a portion of the land cost. Beyond the land, you’ll contribute enough cash equity to satisfy the LTC requirement. The land you already own is often the largest piece of your contribution, which is one reason builders who control their lots get the cleanest terms.
Experience and the Team
Experience carries real weight here, because execution risk is the biggest variable in any build. Builders who’ve completed ground-up projects before get the strongest terms. First-time builders aren’t shut out, but we look much more closely at the general contractor and the team — a strong, proven GC can carry a first-time sponsor. The quality of the team is, in practice, one of the most important requirements on a construction loan.
Credit, Exit, and Reserves
We pull a hard credit report, but there’s no minimum credit score — the project, budget, and team drive the decision far more than your score, and a weaker score is offset with more conservative terms. The exit must be clear: a sale on completion, or a refinance into permanent financing such as a DSCR loan for a build-to-rent hold, sometimes carried by a bridge loan through the gap between completion and permanent financing. And we want reserves and a contingency in the budget, because construction surprises are the rule, not the exception. Interest is charged only on funds drawn (non-Dutch), which keeps your early carry low.
Construction Loan Requirements at a Glance
Construction Loan Requirements at a Glance
What You'll Need to Provide
Expect to provide your plans and specs, a line-item construction budget, the permit status, proof of land ownership or the purchase contract, your builder/GC details and track record, entity documents, and proof of funds for your equity and reserves. Our loan document checklist covers the full package, and our construction loan program page explains how the draw process works in detail. Current pricing is on our construction loan rates page.
Frequently Asked Questions
Up to 90% of loan-to-cost (LTC), not to exceed 75% of the after-completion value (ARV). Both limits apply, and whichever is tighter sets your loan amount. You cover the remainder with land equity or cash.
No. You can already own the lot — in which case your equity counts toward the deal — or acquire it as part of the construction loan, since we can fund a portion of the land cost.
Experience helps and earns the best terms, but first-time builders can qualify, especially when paired with an experienced, proven general contractor. We look closely at the project package and the team, because a strong builder reduces the execution risk.
There’s no minimum credit score. We pull a hard credit report, but the project, the budget, and the team drive the decision far more than your score. A lower score is offset with more conservative terms rather than an automatic decline.
Through a draw schedule. Rather than releasing everything at closing, we fund in stages as construction hits milestones — you request a draw, an inspector verifies the completed work, and we wire the funds. You typically pay interest only on what’s been drawn.
Wondering if your build qualifies?
Tell us the plans, the budget, and the lot. We underwrite the project and the team — and we manage the draw process in-house so your build never stalls.