How to Buy Land and Build a House With One Loan
You do not need a separate lot loan and a separate construction loan. One loan covers it all from acquisition through certificate of occupancy. Here is exactly how it works.
The One Loan Solution
One of the most common misconceptions among developers entering the new construction space is that buying land and building a house requires two separate financing transactions: a lot loan to acquire the land, and then a construction loan to fund the build. In conventional bank lending, this is often true and it creates two sets of closing costs, two underwriting processes, and two timelines.
With a direct private construction lender, the process is fundamentally different. A single construction loan covers both the acquisition of the land and the full cost of building the home, from demolition or site clearing through the last coat of paint and the certificate of occupancy. One loan, one closing, one set of transaction costs, and one relationship to manage through the life of the project.
This is how experienced developers in Massachusetts, Connecticut, and across New England structure the vast majority of their ground-up new construction projects, and it is the financing structure we use for every deal we fund at Mayflower Venture Partners.
How the Loan Is Structured
A combined land acquisition and construction loan has two components that are funded at different stages of the project. Understanding how money flows through the loan from closing through certificate of occupancy helps you plan your project timeline and cash flow more accurately.
How the Money Flows
The acquisition portion of the loan funds at closing. You use it to purchase the land, pay your down payment from your own capital, and own the lot free and clear of the seller. From that point, you own the asset and you control the timeline.
The construction holdback is the portion of your loan that funds the build. It sits in reserve until you are ready to draw from it. As your project hits defined milestones — site work, foundation, framing, mechanical, finish work, certificate of occupancy — you submit draw requests and the funds are released within 48 hours. You pay interest only on the amount that has been disbursed, which means your interest cost starts low and increases as the project progresses and more of the construction holdback is funded.
One Loan vs Two Loans: Why It Matters
Step by Step: How to Get a Land and Build Loan
Find your lot and go under agreement
Before you apply for financing, you need a property under agreement. Your purchase and sale agreement is one of the primary inputs in our underwriting. Once you have a signed P&S, call us immediately. Do not wait until the week before closing to start the financing process.
Prepare your deal summary
Know your purchase price, your construction budget, your projected exit price, and your comparable sales before you call. A developer who can describe their deal clearly in five minutes moves through our process significantly faster than one who is assembling information after the initial conversation.
Receive your term sheet within 24 hours
If your deal makes sense, we issue a term sheet within 24 hours of receiving your information. The term sheet outlines the loan amount, the split between acquisition and construction holdback, the interest rate, the origination fee, and the closing timeline.
Close in 10 to 14 business days
From term sheet to closing is 10 to 14 business days. Before closing, we establish the full construction draw schedule with you and your general contractor so there are no ambiguities once the build begins. You own the land at closing and can begin the permit process immediately.
Draw as you build
As construction progresses, you submit draw requests at each milestone. We process and fund draws within 48 hours. Your interest cost increases as more of the construction holdback is disbursed, but you only pay interest on the amount actually advanced. Not on the full loan.
Sell and repay
When construction is complete and you have your certificate of occupancy, you list the property and sell it. The full loan principal is repaid from the sale proceeds at closing. Your profit is the difference between your sale price and your all-in cost including land, construction, interest, fees, and selling costs.
What You Need to Qualify
The Deal Requirements
The land must have a clear, financeable title. Your construction budget must be realistic and prepared by a contractor who has built at this price point. Your projected exit price must be supported by recent comparable new construction sales in the specific neighborhood. And the math must work — your all-in cost must leave meaningful margin relative to your exit.
The Borrower Requirements
You must have at least one completed ground-up construction project. We are a professional developer program and we do not finance first-time builders on ground-up builds. You must have demonstrated liquidity to handle contingencies and interest payments. And you must be able to show us who you are and what you have built.
We provide combined land acquisition and construction loans throughout Massachusetts, Connecticut, Rhode Island, New Hampshire, and Maine. If you have a lot under agreement and need financing to close and build, reach out today. Term sheet in 24 hours.
Land Under Agreement. Ready to Build.
One loan covers the lot and the build. Term sheets in 24 hours. Close in 10 to 14 days.