Ground-Up Construction Loans for Investors and Builders

A ground-up construction loan finances building a property from scratch — the lot purchase and the construction costs in a single loan, with funds released in stages as the build progresses. It’s the financing behind new-construction investor projects: spec homes, build-to-rent communities, and small developments across the country.

Up to 95% of total project cost for experienced builders, 85% for first-timers. Reserves matter more than a perfect score.

Who Ground-Up Construction Loans Are For

Investors building spec homes to sell in high-demand markets
Build-to-rent developers constructing single-family rentals or small rental communities
Experienced flippers stepping up from renovations to new construction
Builders who need investor-friendly capital without bank red tape
Landowners sitting on entitled or nearly entitled lots ready to build
First-time builders — new to building from the ground up? You’re welcome here. Pair up with a solid general contractor and we’ll walk you through how construction financing works, step by step, before you commit to anything

If you can manage a build — yourself or with a solid GC — this loan funds the project the banks make painful.

How Ground-Up Construction Loans Work

Project review. We evaluate the lot, your plans and specs, the builder/GC, the construction budget, and comparable new-construction sales in the area.
Single closing. Lot acquisition and construction are typically funded under one loan, so you’re not juggling separate land and build financing.
Staged draws. Construction funds are released in draws tied to completed milestones — foundation, framing, mechanicals, finishes — verified by inspection.
Interest-only during construction. You generally pay interest only on the funds actually drawn, keeping carrying costs down while you build.
Exit. Sell the finished property, or refinance into permanent financing (like a DSCR loan for build-to-rent). Loan terms are short — usually 12 to 24 months.

Leverage: Experienced builders can go up to 95% loan-to-cost (LTC); builders earlier in their track record can go up to 85% LTC. Strong projects with strong teams get the strongest structures.

What lenders scrutinize: the builder’s track record, a realistic line-item budget (with contingency), and comps that support the finished value. A tight budget with no contingency is the fastest way to get a “no.” Contact us for current terms and draw structures.

A gentle word on reserves: Lenders like to see that you’ve got some cash set aside for after closing. Think of it as preparation, not a hurdle — a reasonable cushion makes your file stronger and the approval smoother. We’ll talk through what makes sense for a project your size.

Why Investors Choose Ground-Up Construction Loans

One loan for land + build. Simpler than separate lot and construction financing.
Draw-based funding keeps capital aligned with actual progress — you’re not paying interest on money you haven’t used yet.
Faster than bank construction lending, which is notoriously slow and documentation-heavy.
Built for investors, not just owner-builders — the underwriting understands spec and build-to-rent economics.
A clear path to the exit, whether that’s a sale or a refinance into long-term rental financing.
Entity-ready. Building in an LLC or project-specific entity? Sewell Business Services (our sister company) handles the formation so your structure is clean from day one.

Ground-Up Construction: What to Know

We’re based in Fort Worth, Texas, and we finance ground-up projects in most states. Licensed in Texas, Florida, California, and Arizona; investment-property loans available in most states. Texas is a build-friendly state, and the details matter — here’s what we watch:

No state income tax and strong in-migration keep new-housing demand high in DFW, Houston, Austin, and San Antonio — but lot prices in the inner cores have pushed many investors to the suburbs and exurbs, where the math still works.
Permitting timelines vary wildly by municipality. Some Texas cities permit in weeks; others take months. Your loan timeline should reflect your city’s reality — we’ll talk through it.
Labor and material costs need current local bids, not last year’s numbers. We want to see a budget built on real quotes.
Build-to-rent is booming across Texas, and DSCR refinances on finished rental product are a natural exit we can plan from the start.

Frequently Asked Questions

What’s the difference between a construction loan and a fix and flip loan? A fix and flip loan funds purchase + renovation of an existing structure. A ground-up loan funds building from zero — lot plus vertical construction — with draw schedules tied to build milestones. Different underwriting, different budgets, different timelines.

Do I need to own the lot already? Not necessarily. Many ground-up loans fund the lot purchase as part of the same loan. If you already own the lot free and clear, that equity typically counts toward your skin in the game.

How much do I need to put down? It depends on the project’s strength, your experience, and the finished value. As a guide: experienced builders can go up to 95% loan-to-cost, and beginners up to 85% loan-to-cost. You’ll still have meaningful equity in the deal — construction is higher risk than a purchase loan, and lenders price for it. We’ll give you a straight answer on your project.

Can a first-time builder get a construction loan? Yes — first-timers are welcome here, and we fund them regularly. The keys are an experienced general contractor leading the build and a solid, realistic budget. Your GC’s track record fills in where your own build experience is still growing, and we’ll walk you through the whole process.

How do construction draws work? Funds are released in stages as work is completed and inspected — for example, foundation, framing, rough-ins, and finishes. You pay interest only on what’s been drawn, which keeps costs down during the build.

What if construction runs over budget? This is why lenders want to see a contingency line (typically 5–10%) in the budget. If overruns exceed contingency, you’ll need to bring additional cash. Realistic budgets up front prevent painful conversations later.

Can I refinance into a DSCR loan when the build is done? Yes — that’s the standard build-to-rent exit, and it’s a common path for our borrowers. We handle both sides, so your permanent financing can be lined up before the final inspection.

Let’s Talk About Your Build

Bring us the lot, the plans, the budget, and the comps — we’ll tell you honestly whether the project pencils and how we’d structure it. No bank runaround.

Call 817.862.6922 or email joel@lawtonbuildingandloan.com to discuss your project.

Joel Lawton, NMLS #380245 — Lawton Building and Loan.

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