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A business-purpose construction project
The options described here address eligible non-owner-occupied investment construction, such as a spec home or build-to-rent project. They are separate from an owner-occupied construction-to-permanent mortgage.
Explain who will own the property, who will build it and whether the completed home will be sold or retained. Those facts determine the relevant program and the documentation needed.
Separate land and construction advances
Construction financing may have different limits for the initial land advance, total project cost and completed value. A maximum total loan-to-cost percentage does not mean that percentage of land value is advanced at closing.
Bring the land purchase or payoff, budget and valuation assumptions together. The most restrictive applicable limit can determine the actual loan. Your contribution, fees and contingency funds need to be planned alongside it.
The sponsor and builder both matter
Completed-project history can affect leverage. A new investor may be considered under a specific route with a qualified, experienced builder, but the builder’s experience does not automatically erase sponsor requirements.
Provide licenses, experience, contracts and the project team information requested. Permits, plans, utilities, site conditions and local demand also matter. A general construction-loan headline is not approval of a particular site or builder.
Draws and contingencies keep the work funded
Construction funds are generally advanced according to the approved draw process. Inspections, lien documentation, budget changes and other conditions can affect disbursement. Ask what must be completed before each draw and what you must fund first.
Budget for weather, material changes, overruns and a longer timeline. An approved loan amount does not remove the need for liquidity. Understand how change orders or a cost increase would be handled.
The exit is a separate decision
For a sale, evaluate a realistic marketing period and carrying cost after completion. For a rental hold, evaluate future income, value and permanent-loan eligibility. The construction loan does not guarantee a takeout mortgage.
Review maturity, interest calculations, extensions and final payoff terms before proceeding. I can help compare the financing paths for a documented project and identify the questions that need answers before you commit.
Options and eligibility to compare
Compare the option that fits your credit, loan amount, property and documentation. Each has its own requirements, and the full application must qualify.
New-sponsor construction purchase tier
Credit and underwriting: 650 minimum score for the program; builder and project approval required.
Financing and amount: Zero completed projects in the last three years: initial value/cost advance up to 70%, total loan-to-cost up to 85%, after-repair-value cap 65%. Loan range $100,000–$2 million.
Income and property: Eligible non-owner-occupied single-family home, condo or townhome construction purchase with approved builder, plans, permits and budget. Minimum completed value $175,000.
Benefits and conditions: Different limits govern initial and total funding. Liquidity, contingency and draw requirements still apply.
Experienced-sponsor construction purchase tier
Credit and underwriting: 650 minimum score; at least five completed projects in the last three years.
Financing and amount: Initial loan-to-value up to 75%, initial loan-to-cost up to 80%, total loan-to-cost up to 90%, after-repair-value cap 75%; $100,000–$2 million.
Income and property: Eligible non-owner-occupied single-family home, condo or townhome construction purchase with approved builder, plans, permits and budget. Minimum completed value $175,000.
Benefits and conditions: Higher leverage remains constrained by all applicable value and cost limits. Permanent financing or sale is a separate exit.
Compare the alternatives
Rehabilitating an existing structure may require an investor renovation loan instead.
Review the rental exit separately if the completed property will be retained.
What to gather for a useful conversation
Land ownership, purchase contract and liens
Plans, permits and detailed budget
Builder and sponsor experience
Construction contract and draw schedule
Completion, contingency and sale or rental exit plan
Frequently asked questions
Is this an owner-occupied construction-to-permanent loan?
No. This page describes investment-purpose ground-up construction. A home you will occupy needs a separately available consumer program.
Can a new investor be considered?
Selected routes may consider a new sponsor with a qualified builder and a supported project. Experience and leverage requirements must be reviewed for that specific route.
Does maximum loan-to-cost determine the land advance?
No. Initial land advances, total project cost and completed-value limits can each constrain the loan.
Related mortgage learning
Second home or investment property? Start with how you will use it
Short-Term Rental Income: What Needs to Be Reviewed
Authoritative resources
CFPB explanation of interest-only payments
CFPB explanation of prepayment penalties
Talk through your Ohio mortgage options
Call or text Gordon Hinchen at (440) 975-6216. Start with your plans and general questions. Use our secure application process for financial documents.
Educational information only. Not a commitment to lend or a guarantee of approval. Eligibility, availability and terms depend on the complete application, property and underwriting review. DRG Mortgage, LLC | NMLS #2657603 | Gordon Hinchen | NMLS #2751302 | Ohio residential mortgage brokerage services only | Equal Housing Opportunity.