"Ground Up" Construction Loans

Are you building a new 1-4 unit property, condominium, or townhome? Or maybe a 5-9 unit property? Do you need financing for all the infrastructure associated with the project (e.g. earth moving, sewer)? Would you like to receive up to 15% discount on your building materials for your project? Our ground up construction loan is precisely what you need!

Free Consultation – No Obligation

Construction Loans

What is a Construction Loan?

Essentially, construction loans are streamlined financing solutions that allow developers to borrow construction funds to pay for building materials, labor, and the land itself. These loans can be used to build single family homes, multi-family units, condominiums and townhomes.

We provide short-term financing for all of your ground-up construction needs. We offer 18-month terms with rates starting at 11.29%. We can even fund the purchase or refinance of entitled lots, ready for building your project. Whether you're constructing single-family homes, condos, townhomes, or 2-4 unit properties, we've got a solution for you!

How Does a Construction Loan Work?

Construction loans differ from traditional loans in several key ways:

  • Unlike traditional mortgages, commercial construction loans offer short loan terms, typically for a period of 12-18 months, depending on construction plans.
  • The application and approval process is far more thorough, requiring a review of architectural plans, construction timelines, and line-item budgets for each phase of development.
  • Once approved for a construction loan, funds are not disbursed in a lump sum. Rather, disbursements are made through a loan draw process, similar to a line of credit.
  • Subsequent payments are made directly to builders through a series of construction draws based on the completed stages of development. These may require an inspector evaluation before the construction draws are processed.
  • For our construction loans, you pay interest on funds as they are drawn and not on the entire loan amount.
  • Once construction is complete, loans can be converted into a traditional mortgage to simplify the repayment process.

How Can I Qualify For a Construction Loan?

  • All lending for investment purposes only
  • Interest calculated on drawn balance unless Gross Interest is selected
  • Construction draws based on inspection report or supporting documentation
  • No rural properties
  • No Individuals. Borrower must be an LLC or Corporation
  • Minimum 660 credit score. Exceptions considered with compensating factors
  • Must have demonstrated experience of similar property types and size in the last 18 months. Demonstrated experience is evidenced of completed and sold or stabilized inventory
  • Liquidity >= 5% relative to the committed loan
  • Personal Guarantee preferred; Limited Guarantee considered with 50bps fee paid at closing (may not be rolled into the loan balance)

What Are The Advantages of a Construction Loan?

Flexible Terms:
Since construction loans are short-term and are dependent on the completion of the project, our lenders will want you to provide a construction timeline as well as detailed plans and a realistic budget. This actually means that you’ll have a bit more flexibility when it comes to your loan terms compared to a traditional loan, since our lenders understand exactly how far along you are according to your timeline.

It can Transition to a Permanent Loan:
With our construction loans, you only have to pay interest on your loan while construction is in progress. Once construction is complete, the loan can be transitioned to a mortgage-like loan. And since you only pay interest during construction, you’ll have a lower monthly obligation which allows you save more money through the process. This can be particularly helpful should you not have the ability to raise sufficient funds for loan repayment within the short-time frame of the loan.

Guidelines Keep You on Track:
Because our lenders depend on the completion of the project for you to pay the loan back, they can be stricter when it comes to you providing a construction plan. This involves getting specifics from your contractors about dates, materials, workers, methods, etc. for the project. However, having strict guidelines can help you get the job done on schedule and within your budget.

What Are The Disadvantages of a Construction Loan?

Higher Interest Rates and Risk:
Construction loans typically have higher interest rates because unlike traditional loans, they are not backed by collateral since the property has not been built yet. They are also viewed as being riskier because the loan must be paid in full at the end of the term. You as the borrower must be sure you will have the funds to pay off the loan, and the lender has to trust that you will as well.

Harder to Qualify:
Since construction loans are more flexible compared to traditional loans, lenders aren’t handing them out left and right. Generally, borrowers will need to have good creditworthiness and enough money set aside for the down payment and reserves.

Pros

Cons

How to Apply for a Construction Financing?

Give us a call, or fill out our Contact Us form, and we'll start the process 

What If I am Declined for a Construction Loan?

We have several other commercial real estate loans, many with less stringent requirements. We can definitely get you financed so you can see your project to completion.

What Is a Construction Loan?

Essentially, construction loans are streamlined financing solutions that allow developers to borrow construction funds to pay for building materials, labor, and the land itself. These loans can be used to build single family homes, multi-family units, condominiums and townhomes.

 

We provide short-term financing for all of your ground-up construction needs. We offer 18-month terms with rates starting at 11.29%. We can even fund the purchase or refinance of entitled lots, ready for building your project. Whether you’re constructing single-family homes, condos, townhomes, or 2-4 unit properties, we’ve got a solution for you!

How does a Construction Loan Work?

Construction loans differ from traditional loans in several key ways:

  • Unlike traditional mortgages, commercial construction loans offer short loan terms, typically for a period of 12-18 months, depending on construction plans.
  • The application and approval process is far more thorough, requiring a review of architectural plans, construction timelines, and line-item budgets for each phase of development.
  • Once approved for a construction loan, funds are not disbursed in a lump sum. Rather, disbursements are made through a loan draw process, similar to a line of credit.
  • Subsequent payments are made directly to builders through a series of construction draws based on the completed stages of development. These may require an inspector evaluation before the construction draws are processed.
  • For our construction loans, you pay interest on funds as they are drawn and not on the entire loan amount.
  • Once construction is complete, loans can be converted into a traditional mortgage to simplify the repayment process.

How Can I Qualify For a Construction Loan?

  • All lending for investment purposes only
  • Interest calculated on drawn balance unless Gross Interest is selected
  • Construction draws based on inspection report or supporting documentation
  • No rural properties
  • No Individuals. Borrower must be an LLC or Corporation
  • Minimum 660 credit score. Exceptions considered with compensating factors
  • Must have demonstrated experience of similar property types and size in the last 18 months. Demonstrated experience is evidenced of completed and sold or stabilized inventory
  • Liquidity >= 5% relative to the committed loan
  • Personal Guarantee preferred; Limited Guarantee considered with 50bps fee paid at closing (may not be rolled into the loan balance)

What Are The Advantages of a Construction Loan?

Flexible Terms:
Since construction loans are short-term and are dependent on the completion of the project, our lenders will want you to provide a construction timeline as well as detailed plans and a realistic budget. This actually means that you’ll have a bit more flexibility when it comes to your loan terms compared to a traditional loan, since our lenders understand exactly how far along you are according to your timeline.

 

It can Transition to a Permanent Loan:
With our construction loans, you only have to pay interest on your loan while construction is in progress. Once construction is complete, the loan can be transitioned to a mortgage-like loan. And since you only pay interest during construction, you’ll have a lower monthly obligation which allows you save more money through the process. This can be particularly helpful should you not have the ability to raise sufficient funds for loan repayment within the short-time frame of the loan.

 

Guidelines Keep You on Track:
Because our lenders depend on the completion of the project for you to pay the loan back, they can be stricter when it comes to you providing a construction plan. This involves getting specifics from your contractors about dates, materials, workers, methods, etc. for the project. However, having strict guidelines can help you get the job done on schedule and within your budget.

What Are The Disadvantages of a Construction Loan?

Higher Interest Rates and Risk:
Construction loans typically have higher interest rates because unlike traditional loans, they are not backed by collateral since the property has not been built yet. They are also viewed as being riskier because the loan must be paid in full at the end of the term. You as the borrower must be sure you will have the funds to pay off the loan, and the lender has to trust that you will as well.

Harder to Qualify:
Since construction loans are more flexible compared to traditional loans, lenders aren’t handing them out left and right. Generally, borrowers will need to have good creditworthiness and enough money set aside for the down payment and reserves.

Pros and Cons of Construction Loans

Pros

Cons

How Do I Apply For a Construction Loan?

Give us a call, or fill out our Contact Us form, and we’ll start the process 

What If I am Declined For a Construction Loan?

We have several other commercial real estate loans, many with less stringent requirements. We can definitely get you financed so you can see your project to completion.

Construction Loan Amount, Rate, Term and Time to Fund

Frequently Asked Questions

How does a Construction Loan compare to other Commercial Real Estate Loan Options?

Financing TypeFinancing AmountRateTermTime to Fund
Bridge Loan$500k – $20M10.25% – 15.25%12 months – 3 years2- 4 weeks
CMBS Loan$2M – $100M7.09% – 8.94%5-, 7-, 10-year fixed (25/30 year amortization)30 – 45 days
Construction Loan$50k – $20M10.25% – 11.99%18 months2 – 4 weeks
CPACE Financing$1M – $100M4% – 8%15 – 30 years30 – 45 days
Fix and Flip Loan$50k – $7.5M10.25% – 11.99%12 – 18 months2 – 4 weeks
HUD and FHA Loan$1M – $100M7.18% – 8.125%5-, 7-, 10-year fixed (20 – 30 year amortization)60 – 120 days
Long Term Rental Loan$55k – $5M10.25% – 11.99%5/7/10 year hybrid arms; 30 year amortization2 – 4 weeks
SBA 504 Loan$250k – $5M7.12% – 10.25%10 – 25 years45 – 60 days
USDA Loan$2M – $25M9.75% – 12.5%up to 30 years60 – 90 days
Construction Loan
Financing Amount$50k – $20M
Rate10.25% – 11.99%
Term18 months
Time to Fund2 – 4 weeks
Bridge Loan
Financing Amount$500k – $20M
Rate10.25% – 15.25%
Term12 months – 3 years
Time to Fund2- 4 weeks
CMBS Loan
Financing Amount$2M – $100M
Rate7.09% – 8.94%
Term5-, 7-, 10-year fixed (25/30 year amortization)
Time to Fund30 – 45 days
CPACE Financing
Financing Amount$1M – $100M
Rate4% – 8%
Term15 – 30 years
Time to Fund30 – 45 days
Fix and Flip Loan
Financing Amount$50k – $7.5M
Rate10.25% – 11.99%
Term12 – 18 months
Time to Fund2 – 4 weeks
HUD and FHA Loan
Financing Amount$1M – $100M
Rate7.18% – 8.125%
Term5-, 7-, 10-year fixed (20 – 30 year amortization)
Time to Fund60 – 120 days
Long Term Rental Loan
Financing Amount$55k – $5M
Rate10.25% – 11.99%
Term5/7/10 year hybrid arms; 30 year amortization
Time to Fund2 – 4 weeks
SBA 504 Loan
Financing Amount$250k – $5M
Rate7.12% – 10.25%
Term10 – 25 years
Time to Fund45 – 60 days
USDA Loan
Financing Amount$2M – $25M
Rate9.75% – 12.5%
Termup to 30 years
Time to Fund60 – 90 days

Should You Get a Construction Loan?

Construction projects can be costly, but having the funding from a construction loan is the perfect solution to get you the money you need for materials, labor and other expenses. If you’re considering investing in property for the purpose of building a home, or making a major renovation, applying for a construction loan can be a good option. With this in mind, it’s a good idea to weigh the pros and cons in relation to your needs, and speak with and experienced lender to go over your options.

Can I get discounts on building materials?

Yes! In fact one of our lenders is the 4th largest purchaser of building materials in the country! As such, we can offer up to 15% discounts on all building materials.

Ready to take the next step and apply for a Construction Loan?

Free Consultation – No Obligation

Give us a call to see how we can help your business