5 Things You Need to Secure a Ground-Up Loan
Building from the ground up is one of the most rewarding and capital-intensive endeavors in real estate. Whether you're a seasoned developer or a first-time builder, securing a ground-up construction loan requires preparation, clarity, and the right documents. Here's what lenders typically look for before approving your project:
1. A Solid Set of Plans & Specs
Before a lender gives the green light, they want to know exactly what you're building. Be prepared with architectural plans, elevations, and a detailed scope of work. These documents should clearly define the size, layout, building materials, and overall project design. The more complete and professional your plans, the better your chances of approval.
2. A Realistic Construction Budget
Lenders need to see a line-item breakdown of your projected costs, including site prep, materials, labor, permits, and contingencies. Be thorough, but realistic. Underestimating costs can raise red flags and delay your funding. If you’re working with a general contractor, get a signed cost breakdown to submit with your application.
3. Builder Resume or General Contractor Experience
Ground-up loans are risk-based, and experience matters. If you're a builder, provide your resume, list of completed projects, and licensing info. If you’re hiring a general contractor, submit their credentials instead. First-time builders may still qualify—especially if they have a strong team around them and a good deal—but experience will always help.
4. Site Control or Purchase Agreement
Lenders want to see that you have control of the land before financing construction. That could be a recorded deed (if you already own the lot) or a purchase contract if you're under contract. Some lenders may require you to close on the land before releasing construction funds; others can finance both together as a package.
5. Exit Strategy or End Financing
How do you plan to pay off the loan? Lenders want to know whether you’ll sell the finished product or refinance into a long-term loan. This is called your exit strategy. Be clear about your plan and—if applicable—include pre-sale agreements or a refinance term sheet. The stronger your exit, the more flexible your terms may be.
Final Thoughts
Ground-up loans are powerful tools, but getting approved takes more than just a great idea. If you come to the table with clear plans, accurate numbers, and a confident team, you’ll not only increase your chances of approval but also set the tone for a smoother build from start to finish.
Need help securing funding for your next ground-up project? Fletcher Funding can help you navigate your options and get to the closing table fast. Reach out today to learn more.
