Residential construction loans give you the leverage to build, renovate, and sell high-return properties without tying up all your capital. If you’re an investor looking to take your real estate business to the next level, an ABL construction loan could be the answer.

We specialize in providing fast, flexible financing to real estate investors nationwide. Whether you want to build a property from the ground up or rehab a distressed property, our construction loan programs can help turn your vision into reality.

What Is a Residential Construction Loan?

A residential construction loan is a short-term mortgage used to finance the building or renovation of a residential property. Unlike a traditional mortgage, the loan term is typically 12-24 months. After that, you must sell or refinance the completed property to pay off the loan.

Types of Residential Construction Loans

There are three main types of residential construction loans:

Construction-to-Permanent Loans

Construction-to-permanent loans are two loans wrapped in one. First, you get a short-term bridge loan to finance the building project. Once construction is complete, the construction loan is then automatically converted into a long-term mortgage.

For example, ABL lets you seamlessly transition from a construction loan to a DSCR rental loan for completed construction projects that you want to keep as rentals (aka the BRRRR method).

Construction-only Loans

As the name suggests, construction-only loans are exclusively for building and don’t include permanent financing. Typically, you pay off the loan by selling the property or getting a new long-term loan. However, you’ll need to apply and qualify for the second loan separately.

If you want to get a construction-only loan, ABL can help. Our new construction loans are designed for experienced investors with a few successful projects under their belt.

Renovation Loans

Renovation loans are like construction-only loans, except they’re designed for rehabs. Think fix-and-flip or value-add projects. These loans can cover the property purchase and renovation costs or just the latter. Either way, they tend to close quickly.

For example, ABL fix-and-flip loans can close in as few as 10 days, allowing you to seize opportunities quickly and beat your competition to the closing table.

How do Residential Construction Loans Work?

Regardless of what type of residential construction loan you get, here’s how they work:

After closing on the construction loan, loan funds will be disbursed to you according to an agreed-upon draw schedule. Typically, draws are tied to construction milestones. For example, you might qualify for a draw after completing the foundation, framing, drywall, etc.

During construction, you typically make interest-only payments. That way, you can maximize your cash flow during the most cost-intensive phase of the project.

Once the loan is due, you must pay it off either by selling the property and using the sale proceeds or refinancing into a long-term mortgage.

Residential Construction Loan Requirements and Terms

To qualify for a residential construction loan, you must meet the loan requirements regarding:

Credit score. Most construction loan lenders require you to have a minimum credit score. At ABL, it’s 660.
Loan size. Lenders limit how much you can borrow. For example, you can get an ABL construction loan for anywhere from $75K to $50M.
Loan term. Construction loans tend to have short terms. ABL construction loans are available with 12-24-month terms.
After-repair loan-to-value (ARLTV). ARLTV measures how big your loan is compared to the property’s expected after-repair value. ABL lends amounts up to 70% of LTARV.
Experience. Many lenders, including ABL, require you to have some development experience before you can take out a new construction loan.

In addition, you must agree to the lender’s loan terms regarding:

Interest rate. The interest rate determines your cost of borrowing. ABL new construction loans come with rates as low as 9.99%.
Loan structure. Most construction loans, including those from ABL, offer interest-only payments, with the loan principal due at maturity.
Origination fees. Origination fees (aka points) are what lenders charge for processing your construction loan. ABL offers the only true zero-point program in the industry.
Prepayment penalty. Some lenders charge a prepayment fee for paying off your loan early, but not ABL. We let you pay off the loan as early as you want, penalty-free.
Personal guarantee. Many lenders, including ABL, require you to guarantee that you’ll repay the loan with your personal funds if your business can’t.

How to Get a Residential Construction Loan

Now that you know how to qualify for a residential construction loan, here are the steps you must take to get one:

1. Define Project Scope and Goals

First, determine the scope and goal of the project. Are you renovating a property to flip? Building one from the ground up? Or simply updating a property to increase its value?

2. Prepare Budget and Timeline

Next, gather quotes from local contractors to see how much the project will cost and how long it will take. Be conservative in your estimates to avoid budget overruns and delays.

3. Pre-Qualify for a Construction Loan

Share basic details about the project and your finances with a local construction lender like ABL. We can pre-qualify you for a loan within 24 hours.

4. Submit Loan Application with Required Documents

Once you’re pre-qualified, you can submit a full loan application with any required documents regarding your investment plan, business finances, etc.

5. Close on the Loan

If everything looks good, your lender will set a date with you to close on the loan. At ABL, we can close on construction loans in as few as 10 days.

Get a Residential Construction Loan from ABL

Residential construction loans are a powerful tool for real estate investors looking to scale their business and maximize their returns. Whether you’re building from the ground up, rehabbing a property, or executing a fix-and-flip strategy, the right financing makes all the difference.

At ABL, we combine speed, flexibility, and local market expertise to help investors like you bring their projects to life. If you’re ready to take the next step in growing your portfolio, contact one of our construction loan experts today to see how our construction loans can work for you.

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Great experience! They always answered or returned my calls immediately and walked me through the entire process and made sure all my questions were answered. I had a couple of questions weeks after my loan closed and they still responded immediately and made sure I was taken care of. Great experience and I would highly recommend ABL.

Cindy G.

I am glad I got to know Asset Based Lending, they made funding for my construction site very simple. They have a great team of people, that would go out of their way to help. Boris has been great and very helpful, I highly recommend them for all your Construction financing needs.

Mike A.

I have had the pleasure of working with Boris Akbashev for my real estate financing needs on my last 10-15 projects, and I cannot speak highly enough of his professionalism and expertise. Boris demonstrated a deep understanding of the lending process and went above and beyond to ensure I secured the best possible terms.

John S.

Truly a pleasure having ABL on every deal! Thanks to their lending expertise and timely support and guidance throughout the process to get the best loan for my deals. I can see my company growth from 1-2 flips to numerous flips, new construction, and DSCR loan to grow my portfolio.

Pedro E.

Asset Based Lending is the place to shop for all your construction needs. Their easy funding policy, makes life so much simpler for any builder to focus on building and not be worried about financing project. Boris was supper helpful to accommodate me with all me financing needs.

Ray P.

Residential Construction Loans Explained