Hard Money Specialists · Nationwide
Hard Money Construction Loans
Building from the ground up, putting up a spec home or taking a property back to the studs needs financing that follows the build. We give free specialist help to builders and investors across the US and help you explore financing with hard money lenders who fund construction projects.
Planning a build? Tell us about the site, your budget and your timeline to explore specialist construction financing.
How Construction Financing Works
Each lender runs its own process, but most construction loans follow the same broad path from first numbers to final payoff.
Step 1
Plans and budget
You pull together the site details, plans, a line-by-line construction budget and a realistic build schedule.
Step 2
Underwriting
The lender reviews the land, the budget, the builder and an appraisal of the completed value, then checks title and insurance.
Step 3
Closing
If the lender is comfortable, it issues terms and you close. Land costs may be funded or credited at this stage.
Step 4
Draws during the build
As each phase is completed, you request a draw. An inspector confirms the work and the lender releases that portion.
Step 5
Completion
Once the build is finished and signed off, the final draw is released and any retainage is settled.
Step 6
Repayment
You sell the finished property or refinance onto longer-term financing, and the loan is repaid in full.
What Is a Hard Money Construction Loan?
A hard money construction loan is short-term financing for a building project. Instead of handing over the full amount at closing, the lender releases money in stages as the build progresses, and the loan is secured against the land and the property being built.
Banks often want long track records, finished plans and months of paperwork before they will fund a build. Private lenders tend to focus more on the project itself: the site, the plans, the budget, the builder and what the finished property should be worth.
Projects range from a single spec home or a teardown and rebuild to small multifamily, townhome developments and heavy renovations that change the footprint of a building.
New to private lending? Our guide to how hard money loans work covers the basics.
Budgets, Draws and How Loans Are Sized
Loan-to-cost (LTC) compares the loan with the total project cost, meaning land plus hard and soft construction costs. It shows how much of the project you are funding yourself.
Completed value is what the property should be worth once finished. Lenders often cap the total loan at a share of this figure so there is room for costs and a sale or refinance.
Hard and soft costs are both part of the budget. Hard costs are labor and materials. Soft costs include plans, permits, engineering, insurance and fees. Leaving soft costs out is one of the most common budget mistakes.
Draw schedule sets out which stages unlock which amounts, for example foundation, framing, rough-ins, drywall and finishes. Agree it before closing and match it to your contractor's payment terms.
Interest reserve is money set aside within the loan to cover interest during the build. Not every lender offers one, so ask how interest will be paid while the property earns nothing.
Contingency is a buffer for overruns. Lenders like to see one, and on a ground-up build it is rarely wasted.
Exact limits vary between lenders and deals, so treat any figure you see online as a starting point for conversation rather than a promise.
Planning a build? Tell us about the site, your budget and your timeline to explore specialist construction financing.
Example Construction Financing Scenario
Hypothetical scenario
- Land cost
- $120,000
- Build budget
- $380,000
- Estimated completed value
- $650,000
Say a builder owns or is buying a lot for $120,000 and plans a $380,000 spec home, bringing the total project cost to $500,000. Comparable new homes nearby suggest the finished house could sell for around $650,000.
A lender would start by testing those numbers. It would want an appraisal of the completed value, review the budget line by line against the plans, and look at the builder's experience with similar homes. It would then decide how much of the land and build it is prepared to fund, based on its own LTC and completed-value limits.
Whatever the lender does not cover becomes the builder's contribution, along with soft costs, interest during the build and a contingency. Construction funds would be released in draws as each stage is inspected.
Finally, the lender would look at the exit: how quickly similar new homes have sold, and what happens if the build runs a few months late or the market softens. Actual loan amounts, pricing and contribution depend entirely on the lender, the project and the borrower.
What Construction Lenders Look For
The site
Zoning, access, utilities and whether permits are approved or how close they are.
Plans and budget
Approved or near-final plans and a detailed budget that covers both hard and soft costs.
Builder experience
Your track record or your general contractor's. Similar completed projects carry real weight.
Completed value
Recent sales or rents for comparable finished properties that support the end value.
Your contribution
Cash or land equity in the deal, plus reserves for overruns and holding costs.
Exit strategy
A sale plan or a refinance you have checked, with time to spare before the loan matures.
Construction Loan Costs and Considerations
Construction financing usually costs more than a long-term mortgage, and builds have more moving parts than a purchase. Rates and fees vary between lenders and projects, so get them in writing.
Interest
Often charged only on funds drawn so far, which keeps early payments lower. Ask how it is calculated.
Origination fees
Many lenders charge points on the full loan amount at closing, not just the first draw.
Draw and inspection fees
Each draw usually needs an inspection, and some lenders charge per visit.
Soft costs
Plans, permits, engineering, impact fees and builder's risk insurance all need funding.
Holding costs
Taxes, insurance and interest keep running until the property is sold or refinanced.
Delays
Weather, inspections and supply problems extend timelines. Check the cost of an extension before you need one.
Before you commit, run the project on a cautious case: a three to six month delay, a budget overrun and a lower sale price. Our hard money loan calculator can help you estimate interest and points. Open the calculator.
What to Have Ready
Having this ready makes the first conversation faster and helps a specialist point you toward the right lender.
- Site address, land purchase contract or proof of ownership
- Plans, permits or the current permit status
- A detailed construction budget covering hard and soft costs
- A build schedule and proposed draw stages
- Your experience, or your general contractor's, with similar projects
- Comparable sales or rents supporting the completed value
- Proof of funds for your contribution and reserves
- Your planned exit: sale timeline or refinance plan
Compare other options on our loan types page, or read about how our process works.
Frequently Asked Questions About Construction Loans
Talk to a construction financing specialist
Planning a build? Tell us about the site, your budget and your timeline to explore specialist construction financing.
Get your financing options
Share the basics and a specialist will review your options with you. All credit considered.