Ground-Up Construction Loans Explained: From Land to Keys
If you’re ready to build your dream property or expand your real estate portfolio with a new construction project, understanding ground-up construction loans is essential.
What Are Ground-Up Construction Loans?
These loans finance projects starting with an empty lot or tear-down site, covering land acquisition and all construction costs. Unlike standard mortgages, the funds are dispersed in stages, matching your building progress.
Step-by-Step Process
Land Purchase:
Your loan often includes financing for buying the land, which can be a large upfront cost.Builder’s Package:
You’ll submit detailed construction plans, cost estimates, a timeline, and contractor information for lender review.Draw Schedule & Inspections:
Funds are released incrementally such as after foundation completion, framing, and finishing with inspections ensuring work is progressing as planned.Exit Strategy:
You’ll need a clear plan for what happens after construction — selling the property, refinancing into a permanent loan, or renting it out.
What Lenders Look For
Strong project feasibility and financial projections
Experience level of borrower and contractor
Realistic timelines and contingencies
Solid credit and liquidity
Tips for a Successful Ground-Up Loan
Budget with cushion: Construction often runs over budget. Aim for a 10-20% contingency.
Choose your builder wisely: A licensed, reputable builder reduces risk and reassures lenders.
Keep communication open: Regular updates and transparency with your lender keep funding smooth.
Understand the loan terms: Know the interest rates, draw requirements, and what triggers repayment.
Why EJN Financial?
Navigating ground-up construction financing can be complex, but with the right partner, it doesn’t have to be. At EJN Financial, we provide tailored loan solutions and hands-on guidance for every stage of your build.
Ready to break ground? Contact us for a personalized consultation or prequalify today and let’s make your vision a reality.
