A Ground-Up Construction Loan is a specialized financing option designed to fund the construction of a new property from the ground up. This type of loan covers various costs associated with building, whether it’s a single-family home, multi-family unit, or commercial space. Typically, the funds are disbursed in stages, known as "draws," based on the construction timeline and progress. Borrowers may face higher interest rates compared to traditional mortgages due to the increased risk involved. Additionally, a larger down payment—often ranging from 10% to 30% of the total project cost—is usually required. Lenders assess detailed plans, budgets, and timelines before approving the loan to ensure the project's viability. Once construction is complete, some Ground-Up Construction Loans can convert into a traditional mortgage, providing a smoother transition to permanent financing. This loan option offers flexibility and access to capital, enabling builders to create customized spaces tailored to their specific needs.