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

1. Land Purchase:
   Your loan often includes financing for buying the land, which can be a large upfront cost.

2. Builder’s Package:
   You’ll submit detailed construction plans, cost estimates, a timeline, and contractor information for lender review.

3. Draw Schedule & Inspections:
   Funds are released incrementally such as after foundation completion, framing, and finishing with inspections ensuring work is progressing as planned.

4. 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.