A ground-up construction loan is secured by a property that does not exist yet. At closing, the collateral is usually land plus a plan. The budget and draw schedule are what turn the plan into a building, so they are where a whole-loan buyer spends most of its time. A loan with a realistic budget and a disciplined draw history is a very different asset from one without them, even if the borrower, the land and the appraised value are the same.
Why the budget carries so much weight
On a rehab loan, a budget overrun is a problem. On a ground-up loan, it can stop the project. If the money runs out before the building is finished, the collateral is a partially built structure that is often worth less than the land plus the money spent on it. The buyer's first question is therefore simple: is there enough money, in the right places, to finish?
What buyers check in the budget
Completeness
A buyer looks for a line-item budget that covers the whole project, not a lump sum. Typical categories include site work, foundation, framing, roofing, mechanical, electrical and plumbing, interior finishes, exterior work, permits and fees, and soft costs such as architecture and engineering. Missing categories suggest the borrower will need money the budget does not have.
Consistency with the plans and appraisal
The budget should describe the same building the appraisal values and the plans show: the same unit count, size and finish level. A budget for a modest finish attached to an appraisal that assumes a high-end product is a mismatch a reviewer will catch.
Contingency
Construction rarely goes exactly to plan. Reviewers look for a contingency line and whether it is realistic for the scope. A budget with no contingency leaves no room for the ordinary surprises of building.
Feasibility
Beyond the line items, a buyer asks whether the project makes sense: whether the total cost and the projected value leave room for the borrower to finish and exit. At CorrFirst this happens in diligence, after a bid is accepted: our AI underwriting reviews the construction budget and feasibility on every ground-up loan, alongside the appraisal and every loan condition, and our underwriters clear every finding.
What buyers check in the draw schedule
The draw schedule defines when money is released. A good schedule ties each draw to a verifiable stage of construction. Buyers review:
- Milestones: whether draws are triggered by completed, inspectable work.
- Front-loading: whether early draws release a share of the budget out of proportion to the work they cover.
- Retainage: whether part of each draw is held back until completion, where that was part of the structure.
- Inspection requirements: whether every draw requires an inspection before funding.
If the loan is already drawing
Most ground-up loans sold mid-project have a draw history, and it matters as much as the original budget. Your tape or seller portal registration should show the funded balance and remaining holdback; the records below are what you deliver after accepting a bid. Prepare:
- Every draw request and the amount funded.
- The inspection report behind each funded draw.
- Any reallocations between line items, with the approvals behind them.
- Change orders and how they were funded.
- The remaining holdback balance, by line item where possible.
- Servicer and escrow detail: who administers draws and where the holdback sits.
Reviewers compare the percentage drawn on each line with the percentage of that work completed. A line that is nearly fully drawn with the work half done is the clearest early warning on a construction loan.
After purchase, CorrFirst funds the remaining draws, through a third-party inspection on each request, so the borrower's next draw is never in question.
Collateral and diligence standards
CorrFirst buys ground-up construction loans up to 10 units, including multifamily and mixed-use. The standard diligence rules apply: the appraisal must come through an AMC using a local appraiser, and the property must not carry subordinate financing. On larger loans, remember the environmental threshold: a records search is acceptable up to $3M loan amount, and a Phase I is required above that.
Presenting the loan for sale
- Reconcile the budget, the draw history and the remaining holdback so they add up to the loan amount.
- Attach an inspection report to every funded draw.
- Document every reallocation and change order.
- Confirm the budget describes the same building as the appraisal and plans.
- Include the plans, permits and contractor agreement if you hold them.
We return a bid within 24 hours of a tape or seller portal registration, and our bid holds through the commitment period unless diligence finds a material defect. A construction file that is complete and reconciled is the most direct way through diligence to a purchase at the bid you accepted.
To see what we buy and how we review it, visit our ground-up construction program.
