| Project | Business-purpose homes built for resale |
| Key question | Can the project repay the loan without a buyer already contracted? |
| Prepare | Lot, plans, budget, comparable sales and builder track record |
A spec home construction loan finances a home intended for sale before a buyer is under contract. Some programs can consider that structure, but the absence of a presale makes the proposed selling price, market demand, builder experience and available cash especially important. A finished-lot purchase, vertical build and eventual sale need to work as one financing plan.
Stonehaven acts as a mortgage broker for business-purpose construction projects. We help builders organize the request and compare the financing structure. This guide concerns investment builds, not a consumer borrowing to construct a personal residence.
What changes when there is no presale?
A comparable sale supports a value discussion; it does not reserve a buyer. Prepare a realistic selling period, a carrying-cost allowance and a response if the house sells below the original estimate. Ask whether a proposal imposes a presale requirement, a limit on unsold homes or conditions before starting another build.
| Project | What to explain |
|---|---|
| Single spec home | Why this size, layout and price fit the nearby buyer market. |
| Teardown and rebuild | How demolition, site conditions and permits affect the budget and schedule. |
| Several spec homes | How starts, sales and cash requirements overlap across the projects. |
The first review: six facts that make the project understandable
- Site control: owned, under contract or still being negotiated. Show acquisition cost and any payoff separately.
- Readiness: zoning, utility access, plans and permit status. Identify unfinished site work rather than calling the lot ready.
- Full budget: land, demolition if needed, hard costs, soft costs, financing allowances and contingency.
- Sale case: proposed finished specification, comparable sales and expected marketing period.
- Execution: the sponsor’s relevant completions, contractor role and current project workload.
- Cash: contribution at closing plus the money available between construction draws.
A sale-price sensitivity example
This is hypothetical planning arithmetic, not a Stonehaven closing or an offered loan. Assume total project cost of $1,600,000, including the stated financing allowances but excluding selling costs; a $1,360,000 loan; and a projected sale at $2,100,000. The cost-minus-loan gap is $240,000. It is not a final cash-to-close quote because accepted land equity, advances and excluded costs still need review.
| Sale assumption | After 6% assumed selling costs | Less $1.36M loan principal |
|---|---|---|
| $2,100,000 | $1,974,000 | $614,000 |
| $1,890,000 (10% lower) | $1,776,600 | $416,600 |
The amounts in the last column are not profit. They must also return the builder’s invested equity and absorb any overruns, additional carry or payoff charges omitted from the assumptions. A lower sale price can leave enough to repay debt while materially reducing the builder’s return. Replace the assumed selling-cost percentage with your actual estimates.
Can land equity cover the down payment?
It can support a request when accepted under the proposed program, but land value is not cash available for deposits or payroll. Keep the purchase basis, supported current value and mortgage payoff separate. Read our owned-property construction guide before treating appreciation as an available contribution.
Can a first-time spec builder qualify?
That requires a specific review. Hiring an experienced contractor does not automatically satisfy a sponsor-experience requirement. Describe who completed prior projects, in what role, who manages this build and who covers a shortfall. We review the sponsor and contractor roles alongside the budget, cash position and repayment plan.
Questions to settle before accepting terms
- Is the lot advance separate from the construction holdback?
- What must be completed before the first draw, and which costs are reimbursed?
- Is a buyer contract required at any stage?
- What happens if construction finishes but the home remains unsold?
- Are extensions discretionary, and what notice, fees or performance conditions apply?
Use the construction draw guide to plan working cash. For several starts, review financing multiple spec homes.
Bring the project to Stonehaven
Start with the location, number of homes, ownership position, total cost, requested loan, completed value and target closing. We help structure the request and coordinate the next step. Discuss your ground-up construction project.
Source and scope
The OCC Commercial Real Estate Lending handbook discusses construction execution and repayment risks. It is bank supervisory guidance, not a Stonehaven program sheet or a promise of approval. Reviewed October 21, 2026. Numerical examples are our own stated assumptions.