For real estate professionals, building on vacant land isn’t just about creating a property—it’s a strategy for scaling your portfolio and building long-term value.
Financing is often the first major hurdle, but ground-up construction loans offer an investor-friendly path forward.
These specialized products are designed to address the unique needs of those looking to increase net worth and optimize returns, operating differently from traditional mortgages.
If you want a complete guide to ground-up construction loans, look no further.
We’ll cover what investors, developers, and self-employed borrowers need to know to leverage construction financing for portfolio growth, increased cash flow, and higher ROI.
What Are Ground-Up Construction Loans?
A ground-up construction loan is a short-term financing tool that covers the costs of building a new structure on a piece of land. With a standard mortgage, funds are disbursed in a single lump sum.
Conversely, these loans are paid out in installments, known as “draws,” at various stages of the construction process.
These draws correspond to project milestones, such as laying the foundation, framing the structure, and installing plumbing and electrical systems.
The lender releases funds only after an inspector verifies that each stage has occurred according to the agreed-upon plans.
This phased approach protects both the lender and the borrower by ensuring the project stays on track and within budget.
The Benefits of Ground-Up Construction Loans
Savvy investors use ground-up construction loans not just to control the building process, but to strategically drive ROI and accelerate portfolio growth.
Each phase of funding enables optimized capital deployment and allows you to create or reposition assets for maximum future value.
Phased Funding
Pay interest only on funds as they are deployed, which optimizes cash flow throughout the project and preserves capital for other investments.
Flexibility
These loans can fund all project-related expenses, including land acquisition, permitting, and professional services. This flexibility unlocks opportunities to increase asset value and diversify project scope.
Customization
Design and build to specific market demands, ensuring your assets meet rental or resale criteria for a higher exit or stronger ongoing yield.
The Risks of Ground-Up Construction Loans
While ground-up projects can deliver powerful returns, investors should recognize potential speed bumps and manage them proactively. With Westpark, you benefit from experienced underwriters who understand investor priorities and offer solutions tailored to portfolio growth.
Construction Delays
Weather, supply chain issues, or labor shortages can delay projects. Our team works closely with you to develop realistic project timelines and stage funding to keep your build—and your returns—on track.
Cost Overruns
Budgets can be tight, and unexpected expenses are common in construction.
With flexible draw schedules and asset-based underwriting, the experts at Westpark Loans can help you adapt to changing circumstances and keep liquidity available when it matters most.
Interest Rate Fluctuations
Many construction loans have variable interest rates tied to the prime rate. Our investor-focused solutions include rate options, and we’re happy to discuss strategies that limit risk while maximizing project upside.
Qualification Criteria for Borrowers
Our brokers take a pragmatic, investor-friendly approach to qualification. We prioritize the project’s potential and your experience, not just strict credit or W2 requirements.
Asset-based approvals and flexible documentation let seasoned investors and self-employed borrowers move quickly on opportunities.
Borrowers will typically need a good to excellent credit score, often 680 or higher. In addition, a larger down payment is usually required, generally 20–25 percent of the total project cost.
However, for some loan products, we can focus on your track record, asset strength, and project viability above all.
Finally, be ready with a plan that includes architectural blueprints, a detailed budget, a construction timeline, and information on your licensed builder or general contractor.
Interest Rates and Fees
Interest rates on ground-up construction loans are typically higher than those for conventional mortgages due to the increased risk for the lender.
We offer both deferred and interest-only payment options during construction—helping you manage carrying costs while your capital is at work.
Factor origination fees, appraisal fees, inspection fees (for each draw), title insurance, and permit fees into the total project cost—but know that our team keeps your ROI front and center.
Loan Terms and Repayment Options
Ground-up construction loans are short-term, with the construction phase typically lasting 12–18 months. During this period, borrowers usually make interest-only payments on the extracted funds.
The loan must be paid off once construction concludes, usually in one of two ways.
Two-Time Close
The borrower first gets a construction loan. Upon project completion, they must apply for a separate, permanent mortgage to pay off the construction loan. This requires going through two separate closing processes.
One-Time Close (Construction-to-Permanent)
This more streamlined option combines the construction loan and the permanent mortgage into a single transaction. You close once at the beginning, locking in a rate for the permanent mortgage, and the loan converts upon completion of the build.
Investors have the option to refinance into DSCR (Debt Service Coverage Ratio) loans after completion—unlocking long-term, rental-focused financing and improved cash flow for your portfolio.
The Application Process
Applying for a ground-up construction loan is more involved than applying for a standard mortgage. In most cases, you’ll need to gather extensive documentation to prove the viability of your project.
Westpark streamlines the required documentation, recognizing the specific needs of investors and self-employed clients.
The process generally looks like this:
- Hire a reputable builder, architect, and other necessary professionals.
- Develop your budget, timeline, and blueprints.
- Collect your tax returns, bank statements, pay stubs, and other financial records.
- Provide the lender with your complete project plan and financial documentation for review.
- The lender will vet your builder, appraise the future value of the property based on your plans, and assess your financial standing before approving the loan.
Managing the Construction Phase
Construction can begin once the loan is approved and closed.
Managing this phase is the key to a successful project. The loan is disbursed through a draw schedule, where your builder requests funds after completing milestones.
Before releasing each draw, the lender will send an inspector to the site to verify that the work has been completed as planned.
This oversight keeps the project on schedule and protects the lender’s investment. Clear communication between you, your builder, and your lender is essential to ensure a smooth draw process and avoid delays.
Why You Need a Qualified Partner
Navigating the complexities of ground-up construction financing requires expertise.
The process involves multiple moving parts, from builder vetting and budget approvals to draw management and converting to a permanent mortgage.
A strong broker team understands the investment landscape and brings proven experience supporting real estate entrepreneurs, not just general homebuyers.
They can keep your project on track financially and help you secure the best possible terms for the construction phase and long-term financing.
Start Your Construction Journey Right
At Westpark Loans, we specialize in lending solutions for investors, developers, and business owners—offering flexible underwriting, asset-based approvals, and a focus on ROI across every stage of your project.
With an understanding of ground-up construction loans, you are better equipped to find a financing option that will support your growth, not slow you down.
Reach out today to see how Westpark Loans can help you build equity, scale your portfolio, and realize your real estate investment goals.
Ground-up construction loans from Westpark are the proven, investor-focused way to access capital, guidance, and results. Start planning your next project with a team that understands your business!