Buy the lot and build on it with one loan, or put the equity in land you already own to work as your down payment. Either way it is a single loan, a single closing, and the same construction holdback funding your draws.
Land you own outright is the strongest position a builder can start from. It often covers the entire equity requirement, and on some deals it puts cash back in your pocket at closing.
Yes, and it is one loan rather than two. You are not closing on the land, waiting, and then applying for construction financing separately.
At closing you receive 60% to 70% of the land value. The remainder of the loan is held as a construction holdback and funds in draws as the work gets done.
This is part of our ground-up construction loans program.
The day-one advance against the land depends on where your permits stand:
That is the same whether you are purchasing the lot or refinancing one you already own.
Then your equity is already in the deal, and it counts toward your required contribution.
On a lot owned free and clear, the equity frequently covers the entire requirement, and the day-one advance against the land can cover your closing costs with money left over. A builder who has held a lot for a few years can close a construction loan without writing a check.
The full calculation, with a worked example, is on the construction loan LTC and down payment page.
The land value comes from the purchase price or the appraisal. Not the tax assessment, not a comparable listing, and not what you believe the lot is worth.
This is where deals most often come apart on the land side. A builder who bought a lot years ago is usually carrying a number in his head that is well above what the lot appraises for today. Land in a market that has moved is worth checking before you build a budget around it.
The construction loan pays it off at closing. We close in first position, so any seller financing or lot loan against the property comes off the title.
It does affect your numbers. Debt against the lot reduces your equity in the deal dollar for dollar, so a $200,000 lot with a $60,000 note contributes $140,000 of equity, not $200,000. A lot owned free and clear is worth materially more to your leverage than the same lot with a note on it.
Yes, up to $500,000 against the equity in land you own.
What borrowers do with it is almost always the same thing: start construction. The cash out puts working capital in hand at closing so the first phase of the build is funded before the first draw is ever requested.
It also counts toward the liquidity requirement on the loan. Pricing and leverage do not generally change on a cash-out deal. A large cash out is looked at case by case.
On a construction loan, we underwrite the land value. The house coming down is not what secures the loan, and demolition sits inside the construction budget.
There is a second route worth knowing about. If the house is still standing and you need time to get through permitting, a bridge loan against the existing property can carry you through that period, and you then refinance into a construction loan. Permits are never required to close.
That route is for a lot with an existing house, and the terms are on the bridge to construction loans for a property with an existing house page. It is not available on vacant land.
Those are two separate loans, with two closings. Which path makes sense depends on how far out your permits are.
We do not lend on raw land by itself.
Entitlement is not required. Permits can still be in process.
On the land side specifically, we need the purchase contract if you are buying, or the payoff statement and proof of ownership if you already own the lot. Your plans follow from there.
The full list, including entity documents and liquidity, is on the documents needed for a construction loan page.
Yes. It is a single loan and a single closing. At closing you receive 60% to 70% of the land value, and the rest of the loan is held as a construction holdback that funds in draws as you build.
60% of land value without permits issued, or up to 70% with permits in hand. That is the same whether you are buying the lot or already own it.
Yes, and it can cover your entire required contribution. At the 85% LTC standard you contribute at least 15% of project cost; at up to 90%, case by case for highly experienced borrowers, at least 10%. Equity in land you already own counts toward it.
Land is valued at the purchase price, or the appraised value if lower, unless you have owned it for at least 6 months and permitting or subdivision work has been done. Then the appraised value is used.
The construction loan pays it off at closing. Existing debt reduces your equity in the deal dollar for dollar, so a lot with a note against it contributes less than a lot owned free and clear.
Yes, up to $500,000. Most borrowers use those funds to start construction, and the cash out also counts toward the liquidity we require you to have on hand.
Yes. Land you own outright is usually the strongest position to start from, because the equity can cover your entire contribution and the day-one advance can put money back in your pocket at closing.
Yes. On a construction loan we underwrite the land value, and demolition sits in the construction budget. If the house is still standing and you need time to pull permits, a bridge loan on the existing property followed by a refinance into a construction loan is the other route. Those are two separate loans.
Not on its own. A lot qualifies when it is two acres or less and in an urban or suburban market.
No. Entitlement is not required. Permits can still be in process, though your day-one advance is 60% of land value rather than 70% until they are issued.
Under contract or owned for years, we will tell you what it supports.