The practical path to ground-up financing — build a tight project package, understand LTC and ARV, draw as you build, and exit by sale or refinance.
Building from the ground up needs financing that releases money in stages as the structure rises — something a standard purchase mortgage was never designed to do. A ground-up construction loan funds land, materials, and labor through a draw schedule tied to the build, underwritten on the project rather than your tax returns. This guide walks through how to finance new construction, from the project package to the payoff.
For the full product breakdown, see our ground-up construction program; below is the practical path.
Step 1: Build a Tight Project Package
New construction asks more of the borrower than any other short-term loan because you’re financing a plan, not a finished asset. Lenders want architectural plans, a realistic and detailed construction budget, permits or a clear path to them, a timeline, and a credible builder. A tight, well-documented package is the single biggest thing that gets a construction loan approved.
Step 2: Understand the Two Numbers That Drive the Loan
Two figures size a construction loan. Loan-to-cost (LTC) is how much of your total project cost the lender funds — we go up to 90% on a qualifying deal, with you covering the rest through land equity or cash. Loan-to-after-completion-value (ARV) caps the loan at a percentage of the finished value — we keep it within 75% of ARV. Whichever number is tighter sets your loan amount, so underwrite both before you commit.
Step 3: Bring the Land and Your Equity
You’ll generally bring the lot — owned outright or being acquired as part of the deal — plus some cash. You don’t always have to own the land first; we can fund a portion of the land cost as part of the construction loan. Credit is reviewed, but there’s no minimum score; the project and the team drive the decision more than your number does.
Step 4: Close and Draw as You Build
Rather than releasing all the money at closing, a construction loan disburses funds in stages as the build hits milestones — foundation, framing, mechanicals, finish work. When a stage is done, you request a draw, an inspector verifies the work, and funds wire to you. You typically pay interest only on the amount drawn so far (non-Dutch), which keeps your carrying cost low early on.
Step 5: Exit by Sale or Refinance
Every ground-up loan ends one of two ways. Build-to-sell projects pay off from the sale at completion. Build-to-rent projects refinance into permanent financing such as a DSCR loan once the property is complete and leased. If leasing or final inspections run long, a bridge loan can carry the project through the gap.
New Construction Financing at a Glance
New Construction Financing at a Glance
Frequently Asked Questions
Up to 90% of loan-to-cost, not to exceed 75% of the after-completion value. Both numbers matter — whichever is tighter sets your loan amount, and you cover the rest with land equity or cash.
No. We can fund a portion of the land cost as part of the construction loan, so the same loan that builds the structure can help you acquire the lot.
You draw as you build — when a stage is finished, you request a draw, an inspector verifies the work, and we wire the funds. You typically pay interest only on what you’ve actually drawn, so early payments are small.
Experience earns the best terms, but first-time builders can qualify, especially when paired with an experienced general contractor. We look closely at the project package and the team.
There’s no minimum credit score. We pull a hard credit report, and a stronger score helps pricing, but the project, budget, and team drive the decision more than your number.