Financing for New Construction Projects

Construction Loans for New Builds — Fast, Flexible Financing for Real Estate Investors

Construction loans for new projects deliver short-term, asset-backed capital to buy land and fund building work until you exit with a permanent loan or a sale. These products focus on property equity and project feasibility rather than long credit reviews, so investors can act quickly on time-sensitive deals and start construction without months of bank delay. This guide walks through how construction financing works, compares hard-money construction loans with traditional options, and lays out the documents, draw mechanics, LTV ranges, and specialized products used across residential, multi-family, and commercial development. You’ll find clear steps for fast approvals, typical loan-to-value and term examples, and practical guidance on draw schedules, builder requirements, and exit strategies. We reference asset-based underwriting, DSCR and P&L pathways, and real-world use cases so lenders, investors, and owners can choose the right approach and close deals that protect returns.

What Are Construction Loans and How Do They Support New Construction Financing?

Construction loans provide interim financing to acquire land and cover the cost of building until a longer-term loan or a sale replaces the short-term facility. These loans fund work in stages through a draw schedule, releasing money as inspections verify completion milestones. The main advantage is getting projects started quickly by leveraging equity and converting improvements into value—helping developers meet timelines and plan exits with greater certainty. Knowing the loan structure and common underwriting triggers makes it easier to pick between construction-only, construction-to-perm, and hard-money options for different project profiles.

What Types of Construction Loans Are Available for New Projects?

Construction financing comes in several flavors to match project goals and exit plans. Construction-only loans cover the build phase and require a separate permanent loan or sale to repay. Construction-to-perm loans convert to long-term financing at stabilization. Land + construction packages combine land purchase and build funding into a single facility, which is common for spec and build-for-sale projects. Hard-money and bridge products prioritize speed and equity-based underwriting for time-sensitive investor transactions. DSCR and P&L-based approvals are alternatives when cashflow or profit statements can substitute for full historic tax returns for income-producing deals.

• Common products: construction-only, construction-to-perm, land + construction, hard-money construction, DSCR loans, and P&L-based approvals.
• Each product aligns with use-cases like spec homes, multi-family development, or rapid acquisition-to-construction flips.
• Underwriting ranges from income- and credit-focused to asset- and equity-focused depending on the product.

These categories help investors select the structure that fits timeline, exit, and documentation needs; next we explain how hard money compares to traditional lending.

How Do Hard Money Construction Loans Differ from Traditional Financing?

Hard-money construction loans differ primarily by underwriting emphasis, speed, and term length. They focus on collateral value and project equity instead of deep credit profiles or lengthy tax documentation, which enables faster approvals—often within 24 hours to a few days—and compressed closings. The trade-offs are higher rates and shorter terms versus bank financing, but for many investors the ability to close quickly and rely on ARV or equity outweighs cost. Hard-money lenders often accept streamlined paperwork, offer higher LTV on select products, and allow flexible exits, making them a practical choice when traditional lenders can’t move fast enough.

• Hard money prioritizes property equity and ARV over tax returns and strict FICO thresholds.
• Expect faster funding at a higher cost and shorter terms, with milestone-driven draws.
• Evaluate carrying costs and exit certainty before choosing hard money for construction.

What Are the Key Features and Benefits of Fidelity Funding’s New Construction Loan Programs?

Investor-focused construction programs combine quick approvals, flexible underwriting, and a range of products to cover residential and commercial builds. The features that matter most are approval speed for time-sensitive deals, LTV ranges tied to product and ARV, term flexibility for short holds, and documentation centered on equity and project plans. Those elements reduce friction for borrowers who need to move fast while preserving leverage and return targets. Below is a compact comparison to help match a program to your project.

Program Type	Typical LTV / Basis	Term Range	Primary Use
Fix & Flip Construction	Up to ~90% (ARV-based for rehab)	12–24 months	Short-term rehab and resale
Land & Construction	Purchase + construction basis, LTV varies	12–60 months	Ground-up single-family or spec homes
Commercial Construction	Based on cost and DSCR/NOI analysis	12–60 months	Multi-family, retail, office development

This table shows how program choice ties to LTV and term priorities; align your exit to the program for predictable payoffs. Fidelity Funding, headquartered in Glendale, California, specializes in hard-money solutions including land & construction loans and offers investor-centered features: fast program turn times (often 5–7 days, with approvals possible in 24 hours), straightforward requirements focused on property equity rather than extensive credit or tax returns, a broad product set (purchase loans, fix & flip, commercial loans, land & construction), investor-friendly LTVs and short-term terms (commonly 12–60 months), and practical support for time-sensitive closings. Ready-to-go borrowers who submit a complete deal can accelerate underwriting for eligible projects.

How Does Fast Approval and Closing Speed Benefit Real Estate Investors?

Speed matters: quick approvals and closings improve deal capture, reduce carrying costs, and keep projects on schedule. Fast underwriting lets investors remove contingencies, secure off-market buys, and start construction within favorable market or seasonal windows. Faster funding lowers interest, taxes, and insurance carry—protecting investor margins and shortening time to exit. For sales-driven projects, accelerated closings also boost buyer confidence and simplify contractor coordination, which supports on-time delivery and steadier cashflow.

• Fast approvals improve your chances of winning competitive offers.
• Shorter hold times reduce carrying expenses and increase net returns.
• Quick closings simplify contractor scheduling and avoid costly delays.

What Loan-to-Value Ratios and Terms Are Offered for New Construction Loans?

LTV depends on product and underwriting basis—ARV-driven loans use projected finished value while purchase + construction loans use cost or combined basis. Fix & flip construction loans often allow higher LTVs when ARV and scope are solid, while commercial and large-scale development usually use lower LTVs tied to DSCR or NOI. Typical hard-money terms run 12 to 60 months with interest-only periods and balloon payments at exit. Fees and rates vary by product and reflect the speed-versus-cost trade-off; investors should model interest, fees, and carry when choosing leverage.

Product	LTV Range	Term Examples	Repayment Type
Fix & Flip	Up to ~90% (ARV)	12–24 months	Interest-only, balloon
Land & Construction	Variable (purchase+construction basis)	12–60 months	Interest-only during build
Commercial Construction	Lower LTV, income-weighted	12–60 months	Interest-only, convert to perm

Knowing whether underwriting uses ARV, cost basis, or DSCR is key because it controls leverage and exit feasibility. Interest-only payments during construction ease near-term cashflow while balloon payments concentrate repayment at the planned exit.

What Are the Eligibility Requirements and Application Steps for New Construction Financing?

Approval focuses on demonstrable equity, a clear construction plan, and credible builder experience rather than exhaustive historical tax documents for many hard-money pathways. Underwriting typically reviews property and plans, a detailed construction budget and builder contract, proof of funds to close, and a clear exit strategy showing resale or permanent financing. Lenders evaluate builder qualifications, timeline and permits, and projected ARV or stabilized income. A complete, well-organized submission speeds underwriting and shortens decision windows.

1. Submit an initial property and deal summary with project numbers and your exit plan.
2. Provide construction plans, an itemized budget, and the builder agreement.
3. Supply proof of equity or bank statements showing funds to close.
4. Underwriting conducts inspections, title review, and issues final approval leading to closing.

Following this sequence and preparing documents thoughtfully reduces back-and-forth and shortens approval time.

Borrower Type	Required Documents	Typical Qualifiers
Individual Investor	Property info, construction budget, proof of funds	Relevant experience or sponsor equity
LLC / SPV	Entity documents, builder contract, bank statements	Clear ownership and exit plan
Commercial Sponsor	Pro forma, DSCR calculations, permits	Track record or development partner

Once submitted, underwriting centers on equity, plans, and builder experience rather than credit alone; P&L or DSCR routes can enable limited-documentation approvals when appropriate. Organize files in advance and be ready for site inspections and follow-up questions to move quickly.

Which Documents and Borrower Qualifications Are Needed for Approval?

The core package centers on the asset and the plan to improve it. Lenders generally require property details, an itemized construction budget, a signed builder contract, permits or a permit timeline, proof of funds or equity contribution, and an exit strategy that explains sale, refinance, or payoff. Borrower qualifications emphasize relevant experience, demonstrated liquidity or pledged equity, and the ability to manage or hire a capable builder. For DSCR or P&L pathways, lenders may accept income projections or profit & loss statements instead of full tax returns, speeding decisions for sponsors with repeatable cashflow.

• Must-have documents: construction plans, budget, builder contract, proof of equity, title information.
• Helpful extras: prior project summaries, builder résumés, pro forma cashflow, preliminary permits.
• Qualification focus: equity, a viable exit, and builder capability over credit score alone.

A concise, anticipatory packet shortens underwriting cycles and improves the chances of approval within accelerated timelines.

How Does the Construction Loan Draw Schedule Work?

A draw schedule converts construction milestones into incremental funding tied to inspections and verified completion. Typical milestones include foundation, framing, rough MEP (mechanical/electrical/plumbing), drywall/insulation, and final completion. Each draw usually requires invoices, lien waivers, and an inspection report before funds are released. Lenders often hold a retainage percentage until final sign-off to protect against incomplete work or punch-list items. Clear paperwork, timely inspections, and transparent contractor billing make draws predictable and avoid payment delays that stall projects.

• Example milestones: 1) foundation, 2) framing, 3) rough MEP, 4) finishes, 5) final completion.
• Each draw needs inspection evidence, contractor invoices, and lien waivers to release funds.
• Retainage is commonly held until final completion to ensure quality and punch-list closure.

A well-planned draw schedule preserves cashflow discipline while aligning payments to demonstrable value creation during construction.

How Does Fidelity Funding Support Commercial and Residential New Construction Projects?

Our product set supports a wide range of property types with underwriting tailored to asset class and exit profile, balancing speed and appropriate LTV. Single-family and spec builds typically use land + construction or construction-to-perm structures with ARV-based determinations, while multi-family and commercial projects often follow DSCR or income-weighted underwriting. Fidelity Funding’s flexible mix lets investors choose asset-based or income-based pathways depending on project size, documentation, and timing. The underwriting focus stays on project equity, builder experience, and a realistic exit to enable faster closings for qualified deals.

Property Type	Eligible Program	Sample LTV / Considerations
Single-family / Spec	Land & Construction, Construction-to-Perm	ARV or cost basis, moderate LTV
Multi-family	DSCR / Commercial construction loans	Income analysis, lower LTV, NOI focus
Mixed-use	Land + Construction or Commercial product	Zoning, lease-up plan, hybrid underwriting
Raw Land / Development	Phased funding, entitlement risk considered

That mapping clarifies program fit so borrowers can present the most relevant package and simplify underwriting. We apply the right underwriting lens—income-focused for commercial, ARV/cost for residential—while keeping approval and funding speed a priority.

What Financing Options Exist for Commercial and Multi-Family Developments?

Commercial and multi-family construction often hinge on DSCR, NOI, and pro forma rent-roll assumptions rather than ARV. Lenders evaluate projected cashflow to determine sustainable debt levels. DSCR loans measure net operating income against debt service and are common when stabilized income is the planned exit. Underwriting requires detailed pro formas, market rent comparables, and an experienced sponsor to quantify lease-up risk and operating assumptions. Terms and LTVs are typically more conservative than residential products because of higher capital needs and longer stabilization timelines.

• DSCR underwriting focuses on projected income relative to debt service.
• Lenders review market rent comps, vacancy assumptions, and operating expense estimates.
• Sponsors should present realistic lease-up timelines and contingency plans for initial shortfalls.

How Are Residential and Mixed-Use Projects Financed Through Construction Loans?

Residential builds—single-family or small multi-unit—often use land + construction packages or construction-to-perm structures that tie financing to ARV and builder schedules. For speculative homes, ARV-based underwriting sets LTV and maximum loan size, with draw schedules aligned to construction stages to manage risk. Mixed-use projects require attention to zoning and permit sequencing and may need hybrid underwriting treating commercial and residential components separately; lenders might request separate pro formas or blended metrics. Clear exit plans—sale, refinance, or hold for income—help underwriters set terms and choose the right product.

• Land + construction loans combine acquisition and build funding into one facility for simplicity.
• ARV-based underwriting is common for spec homes; mixed-use projects need hybrid analysis.
• Early engagement on permits and zoning reduces entitlement risk and keeps timelines predictable.

What Specialized Construction Financing Solutions Does Fidelity Funding Offer?

Investors frequently need tailored short-term products for renovation, liquidity gaps, or layered capital stacks. Specialized options include fix & flip construction loans for rehab and resale, bridge loans and foreclosure bailouts for immediate liquidity, and second-lien or mezzanine financing to supplement primary capital. These products target specific use-cases: fast rehabs with ARV-based funding, urgent bailouts to avoid foreclosure, or gap capital that bridges to permanent financing. When structured correctly, they help investors preserve deals and manage downside while executing a clear exit plan.

How Do Fix and Flip Construction Loans Work for Renovation Projects?

Fix & flip construction loans underwrite to after-repair value (ARV) and cover acquisition plus renovation costs with draws tied to rehab milestones. These arrangements can support higher LTVs relative to purchase price when ARV and scope justify the leverage; terms are typically short—12 to 24 months—so investors can renovate and resell quickly. Draws release funds as rehab stages complete, and interest-only payments during the hold reduce monthly cashflow pressure. A standard approach models ARV, subtracts planned profit and fees, and sets a loan size that preserves investor returns while covering rehab work.

• ARV-focused underwriting sets the maximum loan based on projected finished value.
• Draw schedules follow rehab milestones like demo, rough work, and finishing phases.
• Short terms and interest-only structures support fast turnarounds and resale exits.

What Are Bridge Loans and Foreclosure Bailouts for Construction Investors?

Bridge loans and foreclosure bailouts provide immediate capital to cover short-term gaps—missed closings, entitlement delays, or temporary funding shortfalls—that could otherwise jeopardize a project. These solutions prioritize speed over cost and typically carry higher rates and fees because of the urgent timeline. Lenders provide bridge funding when a clear near-term exit exists, such as an imminent refinance or sale, and will require documentation showing the need and the planned resolution. For borrowers facing foreclosure deadlines, a rapid bailout can create time to refinance, cure defaults, or complete a sale.

• Bridge loans address short-term liquidity needs and prevent forced sales or foreclosure.
• They are higher-cost but deliver fast access to capital for time-sensitive issues.
• Documentation must demonstrate the immediate need and a credible near-term exit strategy.

What Are Common Questions About Construction Loan Financing for New Construction Projects?

Investors commonly ask about LTV ranges, documentation flexibility, approval speed, property eligibility, and foreclosure timelines. Clear answers set realistic expectations: faster approvals usually mean higher cost; ARV and equity drive leverage; and documented builder experience lowers perceived risk. Addressing these topics early improves deal packaging and reduces surprises during underwriting. The Q&A below covers typical investor concerns in plain terms for quick reference.

Common investor concerns summarized:

• What LTV to expect and which basis lenders use.
• How credit scores and alternative documentation affect approvals.
• Typical approval timelines and ways to expedite closings.

These topics reflect the essentials investors should prepare for a smooth approval process.

What Are Typical Loan-to-Value Ratios for New Construction Loans?

LTV ranges depend on product and underwriting basis: fix & flip ARV loans are often the most aggressive when ARV and rehab scope are credible; land + construction loans use a combined cost or purchase+build basis that yields moderate LTVs; and commercial construction loans typically show lower LTVs tied to projected NOI and DSCR. Builder experience, collateral quality, and a strong exit plan also influence achievable LTV. Presenting solid equity, clear plans, and an experienced builder can create flexibility within program guidelines.

• Fix & flip: higher LTV relative to ARV—typically the most aggressive option.
• Land + construction: moderate LTV based on combined cost basis.
• Commercial: more conservative LTV tied to DSCR and NOI forecasts.

Can I Get a Construction Loan with Bad Credit or Limited Documentation?

Yes—asset-based underwriting reduces emphasis on traditional credit metrics, and lenders can accept P&L statements, bank statements, or DSCR pathways instead of full tax returns in many cases. Limited-documentation options exist for qualified projects where strong collateral, a reputable builder, and a clear exit mitigate risk; expect higher rates or additional collateral for documentation flexibility. A complete project packet—budgets, builder agreements, and proof of equity—significantly improves approval odds even with imperfect credit.

• Asset-based underwriting can enable approvals despite low credit scores.
• P&L or DSCR evaluations can substitute for full tax-return documentation.
• Prepare strong project evidence to offset limited personal documentation.

Ready to move forward? Submit a deal package or contact the lending team to begin a rapid review. Fidelity Funding provides fast programs, practical underwriting focused on property equity and construction plans, and hands-on guidance through draw scheduling and closing. Compile your project summary, construction budget, builder agreement, and proof of equity, then submit your deal for a swift decision and potential approval within accelerated timelines for time-sensitive projects.

Frequently Asked Questions

What is the typical timeline for obtaining a construction loan?

Timelines vary with lender and project complexity. Generally, approvals can happen within 24 hours to a few days, with closings taking anywhere from several days to a couple of weeks. The biggest factors are documentation completeness, lender capacity, and project requirements. Being organized and submitting a full package speeds the process.

Are there specific eligibility criteria for construction loans?

Yes. Lenders typically require demonstrable project equity, a clear construction plan, and credible builder experience. They’ll review property details, the construction budget, the builder contract, and proof of funds. While traditional credit may be less critical in asset-based lending, a solid exit strategy and relevant experience materially improve approval chances. Requirements vary by lender, so confirm specifics with your lender.

What are the risks associated with construction loans?

Construction loans carry risks like project delays, cost overruns, and market shifts that can affect finished value. Delays or overruns may strain finances, especially if repayment timelines are tight. If the completed property appraises below expectations, refinancing or sale options can be impacted. Do due diligence, build contingencies into your budget, and maintain open communication with your lender to manage these risks.

Can I use a construction loan for renovations or improvements?

Yes. Construction loans cover renovations and improvements—commonly through fix & flip products that underwrite to ARV. These loans combine acquisition and rehab costs with draws tied to rehab milestones so you access funds as work progresses. Present a clear plan and budget to ensure lender alignment with your scope.

What happens if the construction project goes over budget?

Overruns create funding gaps that may require additional financing or scope adjustments. Lenders review detailed budgets and may have provisions for overruns, but exceeding the budget typically means securing extra capital or reducing scope. Maintain a contingency reserve and notify your lender early to explore options if costs rise.

How can I improve my chances of loan approval?

Improve approval odds by submitting a complete project packet: detailed construction plans, an itemized budget, a signed builder agreement, and proof of equity. Demonstrate relevant experience and a credible exit strategy. Transparency about finances and proactive communication with the lender shorten underwriting and reduce surprises.

What are the common fees associated with construction loans?

Common fees include origination fees, appraisal and inspection fees, draw fees, and closing costs. Interest rates vary by product and borrower profile; some loans carry prepayment penalties. Ask for a full fee breakdown up front so you can model total carrying costs and avoid surprises.

Conclusion

Construction loans give real estate investors the agility to seize opportunities with fast, flexible financing that matches project needs. By understanding loan types, underwriting bases, and the draw process, borrowers can make informed choices that protect returns and keep projects on schedule. If you’re ready to move ahead, submit a deal package or contact our team to accelerate approval. Discover how our tailored construction financing solutions can support your next project.