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Ground-Up Construction Financing: Draw Schedules, LTC Tiers, and the 5 Biggest Budget Blunders
George Tsividakis
May 28, 2025
Break ground with confidence, fund each milestone on time, and finish without blowing the budget.
1 | Why Ground-Up Financing Is a Different Animal
Buying an existing duplex is one thing; pouring a slab on raw dirt is another. With ground-up construction (GUC) you must:
Finance land and vertical build — often in the same note.
Survive multiple inspections before every draw.
Forecast costs 9- to 18-months out (while materials keep yo-yoing).
At LoanFunders.com we’ve funded everything from single-family infill to 60-unit town-home clusters. The projects that close fastest and stay on budget always nail three fundamentals:
Realistic Loan-to-Cost (LTC) tier
Crystal-clear draw schedule
Bullet-proof budget that avoids the “Big 5” blunders
Let’s dig in.
2 | LTC Tiers – How Experience and Credit Drive Leverage
Borrower Profile (1–4 Units) | Min FICO | GUC Experience | Max LTC | Max Loan Amount | Notes |
|---|---|---|---|---|---|
Tier 1 Seasoned Pro | 700+ | 4+ GUC projects | 90 % | $1.5 M (case-by-case to $2 M) | Lowest rate, fastest close |
Tier 2 Mid-Level | 700+ | 2 GUC | 85 % | $1.5 M | Rate +25–50 bps over Tier 1 |
Tier 3 New Investors | 700+ | 1 GUC | 80 % | $1 M | Must bring experienced GC or partner |
Key Takeaway: The cheapest capital flows to borrowers who’ve “been there, built that.” If you’re new, partner up or expect to inject more equity.
3 | Anatomy of a Draw Schedule (Single-Family Example, $400 K Build)
Phase | % of Total Budget | Work Scope | Typical Docs Needed |
|---|---|---|---|
Draw 1 – Mobilization | 10 % | Permits, site prep, footers | Permit copies, photos |
Draw 2 – Foundation & Framing | 20 % | Slab/CMU, framing complete | Inspection report |
Draw 3 – MEP Rough-In | 20 % | HVAC, plumbing, electrical rough | Trade invoices |
Draw 4 – Dry-In | 15 % | Roofing, windows, exterior doors | Photos, vendor liens released |
Draw 5 – Interior Finishes | 20 % | Sheetrock, cabinets, flooring | Progress photos, invoices |
Draw 6 – Punch-Out / CO | 15 % | Final punch list, landscaping, CO issued | Certificate of Occupancy |
Draw requests reviewed in 48 hours at LoanFunders.com; wires land the next business day.
4 | The 5 Biggest Budget Blunders (and How to Dodge Them)
# | Blunder | Real-World Impact | How to Avoid |
|---|---|---|---|
1 | Under-estimating Site Work | Hidden rock, extra grading, utility taps blow the first draw. | Pay for a soils report & detailed civil bid before you close. |
2 | Ignoring Lumber & Steel Volatility | 8 % spike mid-build = $18 K budget hole on a duplex. | Include a 10 % materials contingency; lock supplier pricing with escalation caps. |
3 | Skipping Permit Timeline | City takes 6 weeks, not 10 days. Carry cost $6 K. | Call the permitting office, verify current backlog, build float into schedule. |
4 | GC Change Orders Creep | “Minor” upgrades add $12 K—no lender funds left. | Require written change-order log; approve only after checking contingency. |
5 | No Weather/Seasonality Buffer | Rain delays framing; trades double-booked; project slips 30 days. | Add 15 calendar days per 6-month schedule; set liquidated damages in GC contract. |
5 | Pro Tips for a Smooth GUC Close
Bundle Land & Build in One Loan – Saves two sets of legal fees and appraisals.
Deliver a Line-Item Budget – Round numbers scream “guesswork.”
Order a Rush Title & 2210 Environmental Screen – Clears hidden liens or Phase I triggers early.
Keep FICO Stable – No new trucks, no new credit cards until the slab is poured.
Update Draw Tracker Weekly – A simple Google Sheet shared with lender keeps wires flowing.
6 | How LoanFunders.com Accelerates Ground-Up Deals
Feature | Your Benefit |
|---|---|
24-hr Term Sheets (complete file) | Lock land contract fast |
Desktop + Inspect Appraisals | Cut valuation timeline by 5–7 days |
48-hr Draws | Keep subs happy; avoid work stoppage |
Tiered LTC Pricing | Reward track record; help new builders partner up |
White-Label Broker Portal | Brokers earn fees; we handle underwriting |
7 | Wrap-Up: Build Faster, Smarter, & On Budget
Ground-up construction is the fastest route to forced appreciation—but only if your financing, draw schedule, and budget discipline are airtight. Use the LTC tiers to gauge leverage, follow the six-phase draw roadmap, and steer clear of the “Big 5” budget killers.
Need capital for your next ground-up?
Let’s pour the foundation for your next profit-packed project.