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Ground Up Construction

Ground-up construction loans for real estate investors are different from mortgages on owner-occupied properties in a few ways. First, this construction financing is a short-term loan, not a 30-year mortgage like FHA loans. The loan can be used to cover the costs of construction only, or of the purchase and construction of the property. If you choose to hold the property as a single-family rental, you may need to refinance into a permanent mortgage because the construction loan is a short-term note, unless you owned the property free and clear before beginning the construction project.

One of the key features of ground up construction loans is that they are typically offered by specialized lenders who have experience with construction financing. This can be helpful for borrowers who are unfamiliar with the construction process, as the lender can provide guidance and support throughout the project.

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Another key feature of ground up construction loans is that they typically have more flexible qualification requirements than traditional mortgages. This is because the loan is secured by the value of the land and the completed building, rather than by the borrower's personal credit history. As a result, borrowers who may not qualify for a traditional mortgage due to factors such as a low credit score or high debt-to-income ratio may still be able to obtain a ground up construction loan.

One potential drawback of ground up construction loans is that they can be more expensive than traditional mortgages. This is because these loans typically require the borrower to pay interest-only payments during the construction phase, which can add to the overall cost of the loan. Additionally, ground up construction loans often require the borrower to make a larger down payment than is required for a traditional mortgage.

Ground Up Construction Loans



Looking for lending in a state not listed? We do lend in other states on a case-by-case scenario. Give us a call to see what we can do for you.

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