Ground-up money is the least forgiving product in this business, because the mistakes are made before the first draw ever arrives. Here is how draws actually work, what a build really takes, and where our terms sit against the market.
Construction money is not handed over at closing. It is released in stages as milestones are completed and inspected — and that means the first phase of your build is funded by you.
Work through the order it actually happens in. Permits and impact fees are paid up front, by you. Site prep, clearing and grading, by you. The footings and foundation get poured and paid for, and only then does an inspector visit and authorise the first draw. If your foundation costs $40,000, that $40,000 needs to be in your account on day one. There is no draw called "foundation" that arrives at signing.
Then it repeats in miniature all the way through. General contractors typically expect payment within thirty days of completing their scope, while draw processing commonly runs five to ten business days behind inspection. That gap is real on every phase, not just the first, and the standard answer is a working capital reserve of roughly $20,000 to $50,000 held specifically to bridge it. Builders who skip that reserve are the ones whose crews walk off site while they wait on a wire.
The last one catches almost everybody: the final draw is not available to finish the job. Lenders generally require landscaping, appliance installation and final cleaning to be substantially complete before releasing it. Builders planning to pay for those items out of the final draw discover they have to fund them first — another $30,000 to $50,000 out of pocket at exactly the point the project feels finished.
The structure that creates the cash gap is also the thing that makes construction financing affordable, and it is worth understanding rather than resenting.
Most residential projects run four to six draws tied to milestones — foundation, framing, rough-in, drywall, completion — with an inspector verifying each before funds release. Because you only pay interest on money actually drawn, a phased release costs dramatically less than a lump sum.
Concretely: on a $500,000 construction budget drawn progressively across a nine-month build, interest runs roughly $20,600. Had the lender funded the whole $500,000 at closing, the same nine months would cost about $41,250. The draw schedule is worth roughly twenty thousand dollars on that one project.
Many construction loans also fund an interest reserve at closing, covering the interest for the scheduled build period so you are not writing monthly cheques out of working capital. The catch is what happens when you run past it — once the reserve is exhausted, interest comes out of your pocket monthly, at the worst possible moment in a project.
This is the number first-time spec builders get most wrong, and it is not close.
Most forecast nine months and finish in about thirteen. The gap is rarely construction time — it is permits, inspections, weather, supplier delays, and the two or three unexpected events that each cost a week or two. The honest base case for a typical 2,400 square foot single-family spec build in 2026 is twelve to fourteen months from loan close to certificate of occupancy. Beating that requires a streamlined municipality, an experienced general contractor with real subcontractor depth, and a build season that starts on the right side of the weather calendar.
Which is why term length matters more on construction than on any other product. A twelve-month loan against a thirteen-month build is a guaranteed extension conversation. Our construction programme runs twelve to twenty-four months, against a market norm closer to twelve to eighteen, and that extra runway is worth more than a small difference in rate.
Ground-up construction from 8.5 percent, twelve to twenty-four months, $100,000 to $3 million, up to 75 percent of as-is value with the loan sized to as-completed value up to 85 percent, minimum $150,000 as-completed value, minimum credit score 650. Non-owner-occupied single family, business purpose, held in an entity.
Worth putting that rate in context, because it is the strongest number on this page. Private and hard money construction lending in 2026 is generally priced at 9 to 13 percent, with banks at 7 to 10 percent but demanding far more documentation, longer approval and stricter builder requirements. An 8.5 percent start on private money sits below the private range entirely and close to bank pricing, without the bank timeline.
Origination on private construction money commonly runs 1.5 to 3 points. Budget a construction appraisal at $2,000 to $5,000 as well — it costs more than a standard appraisal because the appraiser is estimating a completed value from plans and specifications rather than valuing something that exists.
There is also a rate match: bring a fully executed letter of intent from a competing lender, with no contingencies, meeting the same underwriting, and the interest rate gets matched. It applies to the rate only and is not a commitment to fund.
We also place fix and flip and bridge from 10.99 percent, DSCR rental loans from 5.99 percent with no minimum credit score, and commercial to $5 million — which matters here because the construction exit is usually one of those two.
Construction is underwritten on the project and the people building it rather than on your tax returns.
The as-completed value. A licensed appraiser produces it from your plans and comparable sales, and it drives the loan amount more than any other single input. If your finished-value assumption is not supported by recent comps in that specific neighbourhood, the loan comes in smaller and the difference is cash you bring.
The budget. Itemised, line by line, with contractor bids behind it. Not a total.
Who is building it. Many construction lenders want a builder with roughly three completed ground-up projects of similar scope; some will accept one completed stick-built project within the last thirty-six months. First-time builders can and do get funded, but the answer is almost always to partner with a general contractor who has a genuine local track record. A first-time developer with a proven GC is a very different file from a first-time developer without one.
Your skin in the game. Expect to bring 15 to 20 percent of total project cost on most new builds, plus the liquidity to cover the pre-draw phase described above.
The exit. Selling the finished spec home, or refinancing into a DSCR rental loan. The lender needs to know which, with numbers, before funding — not after the certificate of occupancy.
A nine-month timeline on a thirteen-month build. Model the real duration and choose the term against it.
No working capital behind the loan. The pre-draw phase and the draw lag both need cash that is not loan proceeds.
A budget without bids. A number with no line items is not a construction budget.
An as-completed value built on optimistic comps. It sizes the entire loan. Get it right before you buy the lot.
A first-time builder with a first-time GC. One inexperienced party is manageable. Two is not.
A house you intend to live in. This is non-owner-occupied business-purpose lending only. Building your own home is a consumer construction loan and a different product entirely.
Yes, with the right team. Bring a general contractor with completed local projects, an itemised budget with bids, and honest liquidity. Prior renovation experience counts for something with a private underwriter even if you have never built from the ground up.
Your down payment on total project cost, plus permits and impact fees, plus site prep, plus the foundation — before any draw. Then a $20,000 to $50,000 reserve to carry the gap between paying contractors and receiving draws.
Extensions are usually available and usually cost about a point, with interest continuing. The better plan is a term with room in it, which is why our twelve-to-twenty-four-month range matters.
Construction lending typically works on a loan-to-cost basis covering land acquisition plus construction budget, which is different from a bank looking only at purchase price. Bring the lot details when you call and we will tell you how it structures.
Sell, or refinance into a DSCR rental loan and hold it. Decide before you break ground — the two exits imply different finish levels, different price points and different buyers.
Answer these and we will tell you whether it is fundable, on what terms, and how fast it could close. Investment property only — we do not lend on a home you will live in.
We will run the numbers and come back to you. If it is time-sensitive, call 903-636-7511.
Dominion Hard Money arranges private and asset-based real estate financing for business purposes only. Not a commitment to lend. All loans subject to underwriting, property review, and approval. Terms vary by property, borrower experience, and exit strategy.
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