New construction loans for investors and builders

A new construction loan pays for a ground-up build in stages, as the work is done. Ambition Lending lends to investors and builders on spec homes, infill, small multifamily and mixed-use projects, releases funds in draws after each phase is inspected, and returns a term sheet within 24 hours on most requests. We underwrite the budget, the builder, the completed value and the exit.

New construction loan terms at a glance

When a construction loan from a hard money lender makes sense

• You have plans, permits or a clear path to them, and a bank's construction process doesn't fit your timeline.
• You're building to sell — spec homes or infill lots in established neighborhoods.
• You're building to hold and plan to refinance into a rental loan once the property is complete and leased.
• You're developing small multifamily or mixed-use and need draws that keep subcontractors paid.

How construction draws and inspections work

Construction money is not advanced in one lump sum. At closing the lender funds any approved acquisition portion and holds the construction budget back. As each phase is finished, you submit a draw request; an inspector confirms the work was completed as claimed and matches the approved plans and budget; and funds for that phase are released. A typical milestone sequence:

1. Site work and foundation
2. Framing and roof
3. Rough mechanicals — plumbing, electrical, HVAC
4. Insulation, drywall and interior finishes
5. Exterior completion
6. Final completion and punch list

The inspection also confirms that the remaining budget can still finish the project. That is what protects you as much as the lender: a build that runs out of money at drywall is worth less than the land and materials in it. More on mechanics in hard money draw schedules explained.

Budget and contingency: what we expect to see

A construction budget should be line-item by trade and phase, so every draw maps to inspectable work. Include each of these explicitly:

• Hard costs: foundation, framing, roofing, systems, finishes.
• Labor and subcontractors: each trade as its own line.
• Soft costs: permits and city fees, engineering and plans, utility connections — the categories most often underestimated.
• General contractor overhead and supervision.
• Insurance (builder's risk) and site security.
• Interest reserve if you want payments funded from the loan — see how interest reserves work.
• Contingency for surprises, sized to the project's complexity.

When costs rise mid-build, the gap is usually covered by borrower funds, a scope change or a revised plan. Document change orders in writing before the work is done — construction change orders and cost overruns explains how lenders handle them.

Permits and timeline

Permitting, material lead times, subcontractor scheduling and weather cause most construction delays, and every month of delay is a month of interest. We review where the project stands on entitlements and permits, the build schedule and the contractor's capacity. Put realistic buffers into the timeline; the loan term should cover the build, the sale or lease-up, and the refinance.

The exit: sell or refinance into DSCR

A construction loan is repaid one of two ways:

• Sell on completion. Underwrite the sale price with comparable new-construction sales and allow for days on market.
• Refinance and hold. Once construction is complete and the certificate of occupancy is issued, lease the property and refinance into a long-term DSCR loan qualified on the rent, or into other permanent debt for larger projects. See when to refinance from hard money into DSCR.

How we underwrite a construction loan

• Builder and borrower experience with comparable projects.
• Budget completeness and the contractor's bid behind it.
• Completed value supported by an appraisal based on plans and specs.
• Your equity in the project and liquidity for overruns and carry.
• The exit, with a backup.

What to send for a term sheet

1. Property address, lot purchase contract or proof of ownership.
2. Plans, specs and permit status.
3. Line-item construction budget and the general contractor's bid.
4. Build schedule and draw milestones.
5. Your completed-value estimate with comps, and your exit plan.
6. Builder track record and entity documents.

Related: how to build a budget lenders approve, fix and flip loans, commercial bridge loans and the LTV and LTC calculator. Send the project to get terms.

Frequently asked questions

Updated October 19, 2026 by the Ambition Lending credit team.