Most builders know the frustrating math of a traditional construction loan. You buy the land with your own cash, contribute 15% to 25% of the build, and wait months before the bank’s money starts flowing. For a spec builder trying to keep two or three houses going at once, that tied-up equity is often the real limit on growth.
Some business-purpose construction programs are structured differently. On qualified projects, they can finance up to 100% of the land purchase and up to 100% of the construction budget, as long as the total loan stays within a percentage of the home’s completed value.
This guide explains how that structure works, why completed value is the number that really controls the loan, and what a builder needs to bring to the table.
What Is a Ground-Up Construction Loan?
A ground-up construction loan is short-term financing for building a new investment property from the foundation up. It is different from a fix-and-flip loan, which finances an existing structure, and from a long-term rental loan, which finances a completed and occupied property.
Common uses include:
- Spec homes built for sale after completion
- Build-to-rent homes that will be leased and later refinanced into long-term rental financing
- Land purchase plus construction, combined into one transaction
- Mid-construction completion of a project that stalled or needs new financing
These are business-purpose loans for non-owner-occupied property. They are not designed for building your own primary residence.
How 100% Land and 100% Construction Financing Works
The idea is simple: the loan can cover both major project costs instead of requiring the builder to fund the land and a share of the build.
The catch is that every program also limits the loan against the property’s as-completed value, sometimes called after-repair value (ARV) on construction deals. On the 100/100 structure Borrowers Capital offers access to, that cap is 75% of completed value.
The loan amount is generally the lower of two numbers:
- The eligible project cost (land plus approved construction budget)
- 75% of the supported completed value
A worked example
| Item | Amount |
|---|---|
| Land purchase | $90,000 |
| Construction budget | $310,000 |
| Total project cost | $400,000 |
| Appraised completed value | $560,000 |
| 75% of completed value | $420,000 |
Because the $400,000 project cost is below the $420,000 value cap, the full land and build cost can potentially be financed. The remaining $20,000 of room under the cap may even support a financed interest reserve.
Now change one number. If the completed value comes in at $500,000, 75% of that is $375,000. The loan is limited to $375,000, and the builder must cover the $25,000 gap.
The lesson: 100% financing is earned by buying land well and building to a value that leaves a real cushion. The bigger the spread between total cost and completed value, the more of the project the loan can cover.
100% Financing Does Not Mean Zero Cash
Even when the land and build are fully financed, builders should plan for costs that usually sit outside the loan:
- Lender points, broker fees and processing fees
- Appraisal, title, legal and recording charges
- Builder’s risk insurance and property taxes
- Interest payments, if no interest reserve is financed
- Costs that exceed the approved budget
- Working capital between draw reimbursements
That last item catches many first-time borrowers. Construction funds are released through draws after work is completed and inspected. You or your builder will often front the cost of a phase and then get reimbursed, so liquidity matters even on a fully financed deal.
Who Qualifies?
Qualification is based on the whole project, not one number. On the 100/100 ground-up program, the baseline starting point is:
- 600 minimum credit score
- At least one completed project (a prior build or comparable investment project)
- Verified liquidity, 10% of the construction budget plus 6 months of payments, third-party fees and closing costs
- A completed value that supports the request within 75%
First-time builders are not shut out. Less-experienced borrowers may still qualify for high leverage, typically up to around 90% of total project cost, reviewed case by case. Bringing an experienced general contractor or partner onto the project can help.
What Lenders Review on a Construction Deal
Construction carries risks a finished house does not, so underwriting digs into the plan itself.
Land and site. Zoning, utilities, road access, lot readiness, existing liens and any environmental concerns.
Plans and permits. Architectural plans, specifications and permit status. A lender wants to know the house is legally buildable as designed.
Budget. A line-item budget covering hard costs (labor and materials), soft costs (permits, engineering, fees) and a contingency. A one-line “build cost: $300,000” will not get far.
Builder. The general contractor’s license, insurance and track record on similar homes.
Completed value. An appraisal based on the plans and specs, supported by comparable new-construction sales.
Timeline and exit. How long the build will take, what carrying costs will look like, and whether the plan is to sell, rent or refinance.
How Construction Draws Work
Construction money is not handed over at closing. It sits in a controlled account and is released in stages:
- The lender approves the budget and a draw schedule tied to construction phases (foundation, framing, dry-in, mechanicals, finishes).
- The builder completes a phase and submits a draw request with invoices and photos.
- An inspector verifies the work.
- Approved funds are released, usually within a few business days.
Build your schedule and cash plan around that rhythm. For more detail, see our guide on how the draw process works; the mechanics are similar for new construction.
Tips for a Stronger Construction Submission
- Buy the land right. Land cost is where most of your value cushion comes from.
- Get real comps. Use recent sales of comparable new construction, not renovated older homes.
- Pad the contingency. Lumber, labor and inspection delays rarely move in your favor.
- Document your experience. Addresses, photos, settlement statements and timelines for completed projects.
- Have permits in motion. A project that is ready to break ground is easier to evaluate.
- Know your exit. If you plan to rent, run the numbers on a long-term DSCR loan before you build.
Run Your Numbers
The quickest way to see whether a project fits is to price it. Our 100% Financing Calculator estimates the total loan, any funding gap and your cash needs in about a minute. When the numbers work, submit the project for a preliminary review, or learn more about our ground-up construction program.
Disclosure
Borrowers Capital LLC provides access to business-purpose real estate financing through correspondent and private lending channels. Program availability, leverage, pricing, fees, loan amounts and approval requirements vary by transaction and are subject to applicable lender guidelines, borrower and property eligibility, valuation, due diligence, underwriting and final approval. References to 100% financing describe the potential financing of eligible project costs and do not guarantee a zero-cash transaction or loan approval. Borrowers Capital LLC may receive compensation in connection with arranging a transaction. This article is general information and does not constitute a commitment to lend, an offer of credit, or financial, legal or tax advice.