What Is Ground-Up Construction Financing and How Does It Work?

Short answer: Ground-up construction financing funds both the land (or existing lot) and the construction budget to build a brand-new home, disbursed through an initial land advance plus staged draws as the build progresses.

What counts as a “ground-up” project

Lenders generally treat any of the following as ground-up construction, not a renovation:

• Vacant land
• Land with just a foundation poured
• A property being demolished to build a new house
• A property that’s down to framing only

If there’s an existing, livable structure being renovated rather than replaced, that’s a fix and flip project instead — the two programs price and underwrite very differently.

Full plans and specs are required

Unlike a rehab budget, a ground-up construction loan requires full architectural plans and specifications before closing — not just a cost estimate. Underwriting reviews the total project cost against the land value and the appraised completed value (ARV) to determine your loan amount.

How the money gets released

• An initial advance is made against the land at closing
• The remaining construction budget is released in draws as work is completed, typically verified through a property inspection tied to your budget’s line items
• The final portion of the budget (commonly the last 10%) is usually held back until project completion, a clear title/lien search, and (if required) a Certificate of Occupancy

Who it’s for

Ground-up construction is built for experienced builders and investors taking a project from dirt to a finished, sellable or rentable home. Because there’s no existing structure to fall back on if the budget runs short, lenders generally weight investor experience more heavily on this program than on fix and flip.

Run the numbers

Enter your land value, construction budget, and expected completed value into the calculator to see an estimated loan amount.