A Ground Up Loan is a type of construction financing that provides real estate investors and developers with the capital needed to build new properties from the ground up. The loan covers both land acquisition and construction costs, with funds disbursed in stages as the project progresses. This type of loan is ideal for those looking to develop new residential properties, such as single-family homes or townhomes. The loan is secured by the property being constructed, and repayment typically begins once the project is completed.

• Ground Up Loans are typically available for residential properties, including:
  • Single-family homes
  • Townhomes
  • 1-4 unit residential properties
• These loans are designed for new construction projects, where the property is being built from scratch.

Funds from a Ground Up Loan are disbursed in stages, known as “draws,” throughout the construction process. These draws are typically aligned with specific construction milestones, such as foundation completion, framing, roofing, and final inspection. The staged disbursement ensures that funds are available when needed while keeping the project on budget.

• The loan-to-cost (LTC) ratio for Ground Up Loans typically goes up to 90%. This means you can finance up to 90% of the total project cost, including land acquisition and construction expenses, making it easier to undertake large-scale projects with minimal upfront capital.

• Yes, a survey and appraisal are generally required for a Ground Up Loan. The survey ensures that the property boundaries and construction plans are accurate, while the appraisal assesses the potential value of the completed project. These documents help lenders evaluate the viability of the loan and the project’s potential success.

• Absolutely. Ground Up Loans are designed to cover both the cost of acquiring the land and the expenses associated with constructing the property. This comprehensive financing solution ensures that you have the capital needed for every stage of your project, from purchasing the land to completing the build.

• The typical loan term for a Ground Up Loan ranges from 12 to 24 months. This term length is designed to accommodate the construction timeline, providing enough time to complete the project and transition to permanent financing if necessary.

Ground Up Loans are generally intended for residential construction projects, such as single-family homes and townhomes. However, the specific types of projects that can be financed may vary depending on the lender’s criteria. It’s important to discuss your specific project with your lender to ensure it meets the eligibility requirements.

The documentation required for a Ground Up Loan typically includes:

• Completed loan application
• Detailed construction plans and budget
• Property survey and appraisal
• Builder’s contract and credentials
• Proof of ownership or purchase agreement for the land
• Financial statements or proof of funds
• Entity formation documents (if applying under an LLC, corporation, or LP)

• Extensions may be possible if the construction project is delayed, but they are subject to lender approval. It’s essential to communicate any potential delays with your lender as early as possible to discuss options for extending the loan term or adjusting the repayment schedule. Keep in mind that extensions may involve additional fees or interest.