Ground-Up Leverage Explained: What 20 Builds Buy

Most investors hear "85%" on a ground-up deal and stop listening. That's where money gets left on the table.

What matters is what the 85% is measured against, what sits on top of it, and what caps it. Here's the full structure in plain numbers.

LTFC: 85% of full cost, not build cost

LTFC stands for loan to full cost. Full cost has three parts:

• The purchase price of the lot
• Sunk costs, meaning money you've already spent on the project
• The remaining construction budget

Standard ground-up leverage at Funded Capital is 85% of that full number. It is not 85% of the build budget alone. It is not a flat cost ratio that ignores what you've already put into the dirt either. Underwriting confirms which sunk costs count, so keep the receipts.

Illustrative example: you bought the lot for $200,000, spent $40,000 on plans, permits and site prep, and have $760,000 left to build. Your full cost is $1,000,000. That's the number the 85% applies to.

If you're still mixing up LTV and LTC, read LTV vs LTC first. Everything below builds on it.

What 20 builds buy: 85% vs 90%

Experience moves the cost number. Builders with 20 or more completed ground-up builds sit in our Tier 5 and get 90% of full cost in construction dollars. Tiers 3 and 4 sit at the standard 85%.

That's five points of cost the loan carries instead of your bank account. On a $1,000,000 full cost, that's $50,000 you keep for the next lot.

What counts as a "completed build" is not up to you. Underwriters check it address by address. Here's how underwriters count completed deals, so you know where you stand before you ask for Tier 5 terms.

The reserve band: 5% that only pays interest

On top of either number, a further 5% of cost can finance the interest reserve.

An interest reserve is money set aside at closing to cover interest payments while the house goes up. A spec home earns nothing until it sells. A build-to-rent earns nothing until it's leased. The reserve carries the loan through that gap so interest isn't coming out of your pocket every month. For the broker view, see our interest reserve guide for ground-up construction.

One rule is fixed. The reserve band never buys construction dollars. It can't cover a framing overrun or a change order on finishes. It pays interest. That's it.

Ask how your reserve is sized and how it's drawn. Know that number before closing, not after.

So the full stack looks like this:

• Tiers 3 and 4: 85% of cost goes to the build. The reserve band adds 5%. All-in: 90%.
• Tier 5: 90% of cost goes to the build. Add the 5% reserve band on top. All-in: 95%.

The math on a $1,000,000 project

Illustrative only, not a quote. These figures come before the ARV cap, closing costs and fees.

Look at the bottom row. Twenty completed builds cut the cash you put into cost by a third on the same project. That is the clearest answer to "what does experience buy?"

The second cap: after-repair value

LTFC is one test. After-repair loan-to-value is a separate one. Underwriting runs both, and the lower number governs.

This is where overpaying for land hurts. Say you pay too much for a lot. Full cost goes up, and the cost-based loan goes up with it. The appraised after-repair value doesn't care what you paid. If the ARV cap comes in below the cost figure, the ARV figure is your loan, and you cover the gap in cash.

Two habits prevent this. First, price the lot backward from the finished value: residual land value: price the lot first. Second, build your ARV from real comps before you sign the contract: how to calculate ARV.

Why the reserve matters more right now

Carry got more expensive in September. CNBC reported on September 16, 2026 that the Federal Reserve raised its benchmark rate by 25 basis points to a target range of 3.75%-4%, its first increase since 2023. The same CNBC report said the Fed indicated another hike is coming. According to PrimeRates, in an update dated September 30, 2026, the U.S. prime rate now sits at 7.00%, effective September 17, 2026.

Budgets are under pressure too. The NAHB, in a post published August 26, 2026, reported that building material costs rose 6.7% over the prior 12 months, based on its July 2026 builder survey. A budget you priced last summer may already be light.

Then there's time. NAHB's Eye on Housing blog, published in September 2026, put the average single-family build at 8.8 months from start to finish. The same post found that homes built for sale were the fastest, at 7.4 months from permit to completion.

Here's what that means for your deal. The reserve gets sized to your schedule. If the schedule is too optimistic, the reserve runs dry before the house sells. A material overrun comes out of your contingency, never out of the reserve band. Build the schedule honestly and carry real contingency in the budget.

What experience buys, and what it doesn't

What 20+ completed builds buy you:

• 90% of full cost toward the build instead of 85%
• The same 5% reserve band on top, for 95% all-in
• Access to the best pricing. Ground-Up starts from 8.99%, and that starting point is priced for Tier 5 builders. It's a starting rate, not a guarantee. Your deal prices inside a range.

What experience doesn't buy:

• A pass on credit. Most programs start at 660+, the best tiers at 680+, and 640-659 is case by case. A score under 680 isn't an automatic no, but credit still prices the loan.
• A way around the ARV cap. Twenty builds won't change an appraisal.
• Construction money from the reserve band. It pays interest for a 20-build veteran the same as anyone else.
• Skipped draws. Funds still release against completed work. Get ready with our construction draw inspection checklist.

Before you send the deal

Four steps give you a clean read and a faster term sheet:

1. Add up full cost in three lines. Purchase, sunk costs with receipts, remaining budget with a line-item breakdown.
2. Write a schedule you'd bet on. Permit to completion, month by month. The reserve gets sized to it.
3. List your completed ground-up builds. Addresses and completion dates. That's how a tier gets confirmed.
4. Check the ARV against comps. If the after-repair cap lands below 85% or 90% of cost, you want to know now, not at appraisal.

Want the full document list? See new construction loan requirements, or go straight to our new construction loans page.

We lend in 45 states. The excluded states are VT, UT, OR, SD and ND. Typical closings take 5-10 business days, depending on the deal. Terms are subject to underwriting, appraisal, title, and insurance.

Apply Now

Got a lot under contract and a budget ready? Send it over and we'll size it against both caps. Bring the three-line cost breakdown, your schedule and your build list. We'll tell you which cap binds.

Apply Now or call (305) 857-5620.