Plans and budget approved
Lender reviews your construction plans, line-item budget, contractor qualifications, and timeline. Once approved, the draw schedule is established with specific milestones and dollar amounts for each phase.
Construction
Ground-up and renovation financing
Build-to-rent portfolios, spec builds, and major rehabs financed with draw-based construction loans. Interest-only during the build phase with clear exit paths to permanent financing or sale.
Discuss your projectTalk to a construction lending specialistAt a glance
Max LTV80%Of completed (as-built) value
Draw processMonthlyInspections at each milestone
Terms12 - 24 moExtensions available
ExitSell or refiConvert to permanent financing
Types of construction loans
Ground-up new construction
Spec homes and custom builds from foundation to finish. Financing covers land acquisition (if needed), vertical construction, and all hard costs. Ideal for builders with approved plans and permits ready to break ground.
Major renovation / gut rehab
Full-scale renovations where the scope goes beyond cosmetic -- structural changes, additions, mechanical system replacements. The loan is based on the after-renovation value, with draws tied to completed work phases.
Build-to-rent (BTR)
Purpose-built rental communities and single-family rental portfolios. Construction financing that accounts for the lease-up timeline and converts to permanent rental debt once the project stabilizes.
How the draw process works
Construction loans release funds in stages as work is completed and verified. This protects both the borrower and the lender by ensuring money flows in step with actual progress.
1
2
Foundation draw
Site work complete, foundation poured and inspected. First draw released upon inspector verification. This typically covers 15-20% of total construction costs.
3
Framing draw
Structural framing, roof sheathing, and windows installed. Inspector confirms the building is dried in and structurally sound. Usually 25-30% of construction costs.
4
Mechanical and interior draw
Rough plumbing, electrical, HVAC, insulation, drywall, and interior finishes. This phase often involves multiple sub-draws as different trades complete their work.
5
Final draw -- CO issued
Final inspections complete, certificate of occupancy issued by the municipality. Remaining funds released. The project is now ready for sale, lease-up, or conversion to permanent financing.
Construction-to-permanent
A construction-to-permanent loan combines the build phase and the long-term mortgage into a streamlined package. Two approaches are available depending on your risk tolerance and timeline.
One-close (single close)
A single loan with one set of closing costs. The construction phase automatically converts to a permanent mortgage when the build is complete. Your permanent rate is locked at closing, protecting you from market changes during construction. Lower total costs, but less flexibility to shop permanent rates at completion.
Two-close
Separate construction and permanent loans with two closings. You pay closing costs twice, but you can shop for the best permanent rate when construction finishes. Better if you expect rates to drop or want to compare lenders for the permanent phase.
What you need to qualify
Construction lending is more documentation-heavy than standard mortgages. Lenders need confidence in both the project and the team executing it.
Experience
Number of completed projects matters. First-time builders can qualify but expect higher down payments and rate premiums. Experienced builders with a track record of on-time, on-budget completions get the best terms.
Plans and specifications
Stamped architectural plans, engineering reports (if required), and detailed specifications for materials and finishes. The plans must be approved or in the permitting process.
Line-item budget
A detailed cost breakdown covering every phase of construction -- site work, foundation, framing, mechanical, finishes, landscaping, and a contingency reserve (typically 5-10% of hard costs).
Contractor license and insurance
Your general contractor must hold a valid license in the project jurisdiction plus general liability and workers compensation insurance. Lenders verify coverage amounts meet minimum thresholds.
Exit strategy
A clear plan for what happens when construction is complete -- sell the property, convert to permanent financing, or lease up and refinance into a rental loan. Lenders underwrite the exit as carefully as the build itself.
Builder vs investor programs
Construction lending is not one-size-fits-all. Licensed builders doing spec work and investors hiring contractors operate under different program structures.
| Feature | Licensed builder (spec) | Investor (hiring GC) |
|---|---|---|
| Who builds | Builder is the borrower and GC | Investor hires a licensed GC |
| Experience required | 3+ completed projects typical | 1+ projects (or strong GC resume) |
| Max LTV | Up to 85% of completed value | Up to 80% of completed value |
| Draw process | Builder manages, lender inspects | GC manages, lender inspects |
| Typical use | Spec homes, small developments | Build-to-rent, gut rehabs |
| Rate pricing | Lower (lower perceived risk) | Slightly higher |
Frequently asked questions
Ready to build?
Get financing structured around your project timeline. Talk to a construction lending specialist today.
Contact us