Texas and Florida together issued nearly 450,000 residential building permits in 2025, according to U.S. Census Bureau data — more than the next eight states combined. Developers know why: population growth, strong absorption, and relatively streamlined permitting have made these two states the most active ground-up construction markets in the country. Getting the ground-up construction financing right is where most first-time and repeat Sunbelt developers run into friction.
This guide breaks down what lenders actually want in Texas and Florida, how construction loan terms compare to other markets, and what your exit strategy needs to look like before a serious lender will engage.
What You’ll Learn
- What lenders look for when underwriting ground-up deals in Texas and Florida
- LTC, LTV, and equity requirements — typical ranges and where there’s room to negotiate
- How the draw schedule works and what it means for your project cash flow
- Key differences between Texas and Florida lender appetite in 2026
- What exit strategy lenders want to see before they fund you
Why Texas and Florida Lead the Nation for Ground-Up Construction
Population growth is the clearest driver. Texas gained 471,000 net new residents in 2025; Florida gained 365,000, per Census Bureau estimates. That’s roughly 2,300 new people landing in these two states every single day of the year.
The result is housing demand that consistently outpaces existing inventory. Dallas-Fort Worth, Houston, Austin, and San Antonio remain the volume leaders in Texas. In Florida, Jacksonville, Orlando, Tampa, and the I-4 corridor are where most permit activity sits — though coastal markets like Sarasota and the Space Coast are active on higher-end spec and luxury product.
For developers, this translates into lender appetite. Construction lending is inherently risk-on — lenders are betting on a stabilized value that doesn’t exist yet. In markets where absorption is strong and comps are recent, lenders take on that bet more willingly. Texas and Florida check both boxes right now.
The broader market context backs this up. According to the Mortgage Bankers Association’s 2026 CREF forecast, total commercial and multifamily mortgage originations are projected to reach $805 billion in 2026 — up 27 percent from 2025. Construction is a meaningful piece of that growth, with Q1 2026 originations coming in 52 percent above Q1 2025.
What Lenders Actually Want: LTC, LTV, and Equity
Ground-up construction loans are underwritten on two metrics simultaneously: loan-to-cost (LTC) and loan-to-value (LTV) of the stabilized property. The lower of the two governs what you can borrow. This is the single most common thing that trips up developers coming from a residential mortgage background.
Most lenders we work with cap LTC at 70-80%. That means they’ll fund $700,000-$800,000 on a $1,000,000 total project budget. Debt funds tend toward the upper end of that range; banks tend toward the lower. LTV on the completed, stabilized value is typically capped at 60-70% — so if your pro forma says the finished product is worth $1.5 million but the appraisal’s comparable sales suggest $1.2 million, the lender is underwriting to the conservative number.
Plan to bring 20-30% of total project costs to the table as equity. That includes hard costs (construction), soft costs (permits, architecture, engineering), and land. If you own the land free and clear, most lenders will credit it toward your equity contribution at its appraised value.
The piece that catches a lot of first-time developers off guard is the interest reserve. Construction loans don’t amortize during the build — you pay interest only on the outstanding drawn balance. Most lenders require an interest reserve built into the loan budget so you’re not coming out of pocket on monthly payments while the project is under construction. Structure this correctly up front, or your cash flow plan has a gap in it.
Credit minimums are real: 680 FICO is a typical floor, and 720 or above opens up more lender options and better pricing. Track record matters just as much — most lenders want to see at least two to three completed comparable projects before they’ll engage on a new construction deal.
How the Draw Schedule Works
Unlike a term loan that funds in full at closing, a ground-up construction loan releases funds in draws tied to project milestones. The initial draw covers land (if not already owned) and early soft costs. Subsequent draws release as work is completed and verified by an inspector or third-party cost consultant.
A typical draw schedule for a ground-up residential or small commercial project runs something like this: foundation and framing, rough mechanicals (plumbing, electrical, HVAC), drywall and exterior, finish work and landscaping, and final inspection at certificate of occupancy. The number of draws varies by lender — some do four, some do six. More draws generally means more inspector visits and more potential for scheduling delays.
Budget an extra two to four weeks per draw in your project timeline for inspection lag. In active construction markets like DFW, Houston, and Orlando, inspectors are booked out. That’s not a lender problem — it’s a scheduling reality you need to plan around.
One thing I’ve seen catch developers: retainage. Some lenders hold back 5-10% of each draw until project completion. Know whether your lender does this before you close — it affects how much working capital you need to float your GC through the final stages.
From a recent deal: I recently structured a ground-up construction loan for a spec single-family build in a Houston suburb — a 2,800 square-foot home in a submarket with strong comps in the $550,000-$600,000 range. The loan funded at 75% LTC on a $420,000 total budget, with a 14-month term and five milestone draws. Rate came in at 8.75% interest-only on the outstanding balance, absorbed through an interest reserve built into the budget. The finished home sold at $595,000 within three weeks of listing — clean exit, lender was out well within the term.
Looking at a ground-up project in Texas or Florida? We structure these deals nationally, with active lender relationships in both states across debt funds, banks, and credit unions. Schedule a 15-minute call →
Texas vs. Florida: Where Lenders Are Leaning Right Now
Both states are active, but lender appetite has some meaningful differences depending on market and product type.
Texas: Appetite is broad — single-family spec, build-to-rent, townhome communities, and small multifamily. Dallas-Fort Worth and Houston have the most capital pursuing them. Austin has cooled from its 2021-2022 peak, and some lenders have tightened on luxury price points there as absorption has slowed. San Antonio remains steady and undersupplied. For most Texas markets, if your pro forma is conservative and you have track record, we can find competitive terms. We’ve placed deals across DFW, Houston, and the San Antonio suburbs in the last 12 months at loan-to-cost ratios in the 72-78% range.
Florida: The picture is more nuanced. Insurance costs have risen significantly in coastal markets, which affects construction budgets and the lender’s view of stabilized value — a finished home at the coast that costs $700 per square foot to insure annually changes your cap rate assumptions. Inland markets — Orlando, Jacksonville, the I-4 corridor — are where most construction capital is flowing right now. Coastal luxury product still transacts, but lenders are applying more conservative absorption assumptions. For small-to-mid-size developers (10 units or fewer), debt funds have been the most active capital source in Florida through the first half of 2026.
What’s consistent across both states: relatively straightforward permitting compared to high-cost coastal markets, strong population-driven absorption, and an active lender community that wants to put capital to work. For more on how Sunbelt markets are performing for income-producing projects, see our Sunbelt multifamily investment guide.
What Exit Strategy Lenders Care About Before They Fund You
Here’s what doesn’t get talked about enough in conversations about construction loans: the lender is as focused on your exit as they are on your entry. They’re underwriting your ability to repay at loan maturity — through a sale or a permanent financing refinance. If your exit doesn’t pencil clearly, the deal doesn’t close.
For for-sale product (spec homes, townhomes, condos), the exit is a sale. Lenders want active comparable listings, recent sales comps, and a realistic absorption timeline. If you’re building five townhomes in a market where 20 are sitting unsold at 90 days, the lender sees that as exit risk — and they’re right to. Don’t walk into a construction loan conversation without a clear answer to: what are the six most recent comps, and what did they sell for?
For for-rent product (build-to-rent, small multifamily), the exit is typically a refinance into permanent financing once the property is stabilized — usually a DSCR loan for 1-4 unit product or agency debt for 5+ units. We see a lot of Sunbelt build-to-rent deals in Texas and Florida move from construction into DSCR at stabilization. The income-based qualification structure works well for the product type — lenders care about the property’s cash flow, not the sponsor’s W-2. For a deeper look at the full construction-to-permanent lifecycle, see our ground-up construction loan for developers guide.
Loan terms run 12-24 months for most ground-up deals. Extensions are available — typically at a fee — but plan your construction timeline conservatively. Build a two-month buffer into your loan term request. The developers who struggle aren’t usually bad at building; they’re bad at estimating how long it takes to get through a municipal inspection queue in a hot market.
Frequently Asked Questions
What is the minimum down payment for a ground-up construction loan in Texas or Florida?
Most lenders require 20-30% equity in the total project cost — not just the construction costs. If you own the land free and clear, most lenders will credit it at appraised value toward your equity requirement. The specific number depends on LTC and LTV caps, the lender’s risk appetite, and the project’s stabilized value relative to total cost.
What’s the difference between LTC and LTV for a construction loan?
Loan-to-cost (LTC) measures the loan as a percentage of total project costs — everything it costs to build. Loan-to-value (LTV) measures the loan as a percentage of the completed property’s stabilized value. Construction lenders underwrite both and lend against the lower of the two. A project can pass the LTC test and still get cut back because the stabilized value doesn’t support it.
How long does it take to close a ground-up construction loan?
For debt fund construction loans, we typically see 20-35 days from a complete application package — site plans, cost breakdown, GC contract, borrower financials, and the appraisal. Bank construction loans take 45-60 days as a rule. Having your documents organized before approaching lenders materially shortens the timeline.
Do I need prior construction experience to qualify?
Experience helps significantly. Most lenders want to see two to three completed comparable projects. If you’re a first-time developer, a well-documented GC relationship with a strong track record can partially substitute for sponsor experience. Expect more scrutiny and narrower lender options, but it’s not impossible to place.
Can I use a construction loan for a build-to-rent project in Texas or Florida?
Yes, and it’s one of the most active deal types we’re seeing in both states. Build-to-rent — single-family or small multifamily designed for long-term rental — typically exits into a DSCR or agency permanent loan at stabilization. For a walkthrough of how townhome construction financing works for for-sale and for-rent product in these markets, that post covers the product type in detail.
Ready to Finance Your Sunbelt Ground-Up Project?
We’re a commercial mortgage brokerage serving developers nationally, with active lender relationships across Texas, Florida, and the broader Sunbelt for ground-up construction, build-to-rent, and townhome development. Send us your scenario — we’ll respond within one business day with realistic terms.
This article is for informational purposes only and does not constitute financial, legal, or tax advice. Loan terms, rates, and availability vary by borrower, property, and market conditions. Consult Willowbrook Capital for scenario-specific guidance.
