Ground Up Construction Loan Process Step by Step

A ground-up construction loan funds the acquisition of a lot (or land) plus the vertical cost to build new 1-4 unit residential investment property. Funds release through a scheduled draw process as construction progresses, and you exit by selling the finished units or refinancing into long-term rental financing.

The process has five phases. First, acquisition: you identify the lot, plans, and budget. Second, underwriting: the lender reviews your LTC, your GC, your plans and permits, and your ARV. Third, closing: you close on the land and the construction facility together. Fourth, construction draws: funds release at defined stages — site work/foundation, framing, dry-in, MEP/rough, drywall/finish, final — each inspected before wire. Fifth, exit: you sell or refinance.

The most common reasons new-build loans stall are unrealistic budgets, an under-qualified GC, and an unplanned exit. Bring a detailed, line-itemed construction budget, a licensed contractor with references, and a credible takeout (sale or DSCR refinance) — and the process runs on schedule.

For build-to-rent developers, the natural exit is a DSCR loan once the property is leased and stabilized. Plan that exit up front so the construction financing and the permanent financing line up cleanly.