What is a spec construction loan?
A spec construction loan finances the land and vertical construction of a home that a builder or investor plans to sell or rent, not live in. Funds are released in draws as inspections confirm completed work, and interest is charged only on the amount drawn.
Estimate only. Final leverage depends on credit, appraisal, budget review and final approval. This is not a term sheet or a commitment to lend.
Spec construction loan terms and requirements
Leverage
- Up to 85% loan to cost
- Up to 75% of after-repair value
- Maximums vary by borrower tier
Loan terms
- $100,000 to $15 million
- Up to 24 months
- Fixed rate, interest only on drawn balance
- Interest reserve available
Eligible properties
- Single-family
- Condominiums and townhomes
- 2–4 unit residences
- U.S. property, first lien at all times
Borrower
- LLC, LP, trust or corporation
- Credit from 660, varies by tier
- At least one completed ground-up project in the past 36 months
- Personal guarantee preferred
To apply
- Completed application and purchase agreement
- Site plan, elevations, dimensioned floor plans and plat map
- Breakdown of costs already paid
- Builder resume if different from the borrower
To underwrite
- Two most recent months of bank statements
- Entity documents
- Detailed, itemized construction budget
- Lender-approved third-party valuation
How construction draws work
Spec construction loans are funded in stages. As each phase of the build is completed, an inspection confirms the work and the next draw is released against the approved, itemized budget.
Interest is charged only on the amount drawn, not on the full loan. An interest reserve can be built into the loan so payments during construction do not come out of pocket.
Spec construction loans vs. owner-occupied construction loans
A spec construction loan is business-purpose financing for a home a builder or investor plans to sell or rent. Approval centers on the project: the budget, the projected value of the completed home and the builder's track record.
A consumer construction loan finances a home the borrower will live in and is underwritten on personal income. Front Street does not offer owner-occupied construction financing.
How we evaluate a spec build
Our CPA-led underwriting reviews the land basis, the itemized budget, the projected completed value and your recent completed projects before a term sheet is issued. Spec loans are sized on two limits, loan to cost and loan to after-repair value, and the lower result sets the maximum loan.
When the home is finished and listed, a completed-home bridge loan can pay off construction debt or free up equity for the next project while it sells.
Residential bridge loans →From first review to closing
Tell us about it
A short intake or a call. Progress saves as you go.
CPA-led underwriting
We analyze the numbers, structure and documents before anything moves forward.
Term sheet or placement
On select investor programs, qualifying deals receive a term sheet from us. Other financing is structured and presented to sources in our network.
Approval and closing
Final approval, appraisal, title and insurance through funding. Steps vary by program.
Spec construction loan FAQs
Can I use this loan to build my own home?+
No. These are business-purpose loans for homes built for sale or investment. They are not available for a home you or a family member will live in.
Do I need construction experience?+
Yes. Lenders require at least one completed ground-up project in the past 36 months. If someone other than the borrower is building, the lender also reviews the builder's resume.
How do construction draws work?+
Funds are released in stages based on inspection reports. Interest is charged only on what has been drawn, not on the full loan amount.
Can I refinance a lot I already own?+
Yes. Purchase and refinance are both eligible. If you have owned the lot more than 24 months, lenders use its as-is value in the cost basis.