Construction Loans

Merchants Mortgage provides construction loans on one to four unit residential properties or multi-family complexes for qualified clients. Typical neighborhoods for this type of loan will be strong infill areas in established neighborhoods. After meeting the qualifications, we will consider funding these loans at up to 80% to 90% of cost. In many cases, the projects are built on a spec basis, and no pre-sale contract is required for funding.

How Do Construction Loans Work?

After being approved for our construction loan, you will be put on a draw schedule that follows the stages of your construction plans. The project timeline you submitted when applying for the loan will be monitored, and you will be required to make interest only payments on the drawn amount during the build. To make sure the process is going according to plan, we will send a construction draw inspector  to the site to review the progress. Post-project, you will still have a payment schedule to maintain. All of those details will be discussed with you prior to loan approval.


Each project is very specific, so the qualifying points below are provided as an example of what an eligible candidate could look like.

  • A credit score of 660+.
  • Previous experience with fix and flip investments or ground up construction.
  • Ready to put down an initial down payment of 10-20% OR own the lot where the build will take place.

As mentioned above, each project will have specific qualifications and needs.Please contact one of our lenders if you have any questions or would like to discuss the qualifications in further detail.

Want to know more information and learn about pricing?

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Types of Construction Loans:

We offer a few types of construction loan options, including ground-up and pop top loans. The solutions below are examples of our options, although they are our most popular, they do not cover all situations. We do have unlisted solutions.

  • Quick Acquisition to Purchase Lot or Lot with House to Scrape w/ No Construction Funds Committed
    • Terms (subject to underwriting):
      • 20 to 25% Down on Purchase Price (subject to “As is” Appraisal)
      • 10.5 to 11% Interest Only with Monthly Payment; 2 to 2.5% Origination Fee
      • 6 Month Loan, No Prepayment Penalty, No Minimum Interest Requirement
  • Refinance of Acquisition Loan to Provide Construction Funds Once Construction Budget and Plans Have Been Completed and Permit Obtained
    • Terms (subject to underwriting and appraisal):
      • Typically 10 to 20% Down payment of the Cost of Construction and Loan-To-Completed Appraised Value of no more than 75%.
      • 10.5 interest only with monthly payment. Interest is charged on the construction funds only as they are drawn.  2.5% Origination Fee
      • 9 Month Loan, No Prepayment Penalty, No Minimum Interest Requirement
      • Automatic 3 Month Extension. Monthly extension fee beginning in month 10 is the loan amount times .0033 per month and any accrued extension fees are added on to the payoff at the end of the loan.
  • Construction Loan When Borrower has Already Paid Cash For Lot
    • Terms (subject to underwriting and appraisal):
      • 100% of construction costs.  See rates and terms previously discussed.

We recommend talking to one of our lenders if you have any questions regarding the construction loan process or the specific loan types. Per the details you are able to provide, our staff will help walk you through the process, guide you towards which loan might be the best option and even get the application process started.

What You Need To Apply For A Loan:

When you’re ready to apply for a construction loan, make sure you have the following documents on-hand:

  • A signed construction contract that is complete with start dates and completion deadlines
  • Lot details inclusive of a deed or offer to purchase
  • Blueprints and specifications for the build
  • Project details including clear specifications of each parties duties and responsibilities including yourself

Why Choose Merchants?

Faster and Easier than Banks, But Cheaper than Hard Money
Fast Closings - Typically in One Week
Easy Income Qualifications - Not Bank or Conventional Underwriting
Experienced Construction Loan Draw Department
Interest Only Charged On Construction Funds as Drawn
Can Close in LLC's and Other Entities
Partial Releases Allowed for Sale of Each Unit on Multi-Unit Properties

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