Ground-Up Construction Financing: Draw Schedules, LTC Tiers, and the 5 Biggest Budget Blunders

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:

  1. Realistic Loan-to-Cost (LTC) tier

  2. Crystal-clear draw schedule

  3. 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

  1. Bundle Land & Build in One Loan – Saves two sets of legal fees and appraisals.

  2. Deliver a Line-Item Budget – Round numbers scream “guesswork.”

  3. Order a Rush Title & 2210 Environmental Screen – Clears hidden liens or Phase I triggers early.

  4. Keep FICO Stable – No new trucks, no new credit cards until the slab is poured.

  5. 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.