How to Prepare a Ground-Up Construction Loan Scenario

Start with the land

Lenders look at the land first because it is the collateral on day one. Be ready to state whether you are buying the lot or already own it, the purchase price or current value, any existing liens, the zoning, and whether utilities are available at the lot line.

If you already own the land, your equity in it can often count toward your contribution. Have the settlement statement from when you bought it and any recent appraisal or broker opinion.

Plans, permits, and entitlements

Construction lenders want to know how close the project is to breaking ground. A project with approved plans and issued permits is easier to evaluate than one still in design. Note which of these you have:

• Architectural or builder plans, with square footage and unit count
• Site plan and any engineering
• Building permit status (applied, approved, or issued)
• Any HOA, historic, or municipal approvals still needed

A line-item construction budget

A single number like “$350,000 to build” is not enough. Break the budget into categories a lender’s inspector can verify: site work, foundation, framing, roofing, mechanical, electrical, plumbing, insulation and drywall, finishes, exterior, landscaping, permits and fees, and a contingency. See our guide to construction and rehab budgets for a template.

Timeline

Give a start date and a month-by-month schedule to completion. Lenders compare your schedule to the loan term. A 12-month build on a 12-month loan leaves no room for weather, inspections, or a slow sale.

Completed value

Estimate the as-completed value using recent sales of comparable new construction nearby. The lender will order its own appraisal, so use conservative comps. Many programs cap the total loan at a percentage of completed value, so an inflated estimate only creates a gap at underwriting.

Your experience and team

Ground-up programs generally require documented experience. List completed builds from the last three years with address, scope, cost, and outcome. Name your general contractor, if you are not self-performing, and include their license and insurance.

Exit strategy

State how the loan will be repaid: sale on completion, refinance into a long-term rental loan, or another source. If you plan to sell, show recent new-construction sales. If you plan to refinance, show expected rent.

Put it together

When these pieces are ready, submit your loan scenario. If some are missing, submit anyway and note what is pending. It is better to find a gap early than after an appraisal is ordered.