You control a legal lot. Plans exist or are in permit. There is no signed buyer. That is a spec home construction loan — not a custom-home mortgage, not a flip, and not a subdivision facility.
Jaken Finance Group funds qualified investor spec builds nationwide at 8.99%–13.5% interest-only on the drawn balance. Term is 12–18 months (extensions available). The loan always funds the lower of loan-to-cost and 75% of as-completed value. Close targets 10–14 business days when plans, budget, and title are already in the file. After certificate of occupancy you sell, or you refinance to DSCR at 5.75%–10.5%.
Apply: new construction application. Still choosing among land, a plat, or a stalled vertical? Start at new construction loans for investors.
CFPB consumer-mortgage rules apply to dwellings the borrower occupies. This product is business-purpose and non-owner-occupied only. Do not apply if you plan to live in the house. This is educational information, not legal or tax advice.
What “spec” actually means
Spec means you are building for the market. The house is not under contract. You pick the plans, carry interest and taxes through construction, and take the sale or rental risk at the end.
The Census Bureau’s New Residential Construction series tracks housing starts and completions nationally. Those tables tell you the country is still building. They do not tell you whether your lot, your comps, and your permit clock will finish inside a 12–18 month interest-only term. That is the underwriting question.
| You have | Product that fits | Product that does not |
|---|---|---|
| One entitled lot, house plans, sell or rent at CO | Spec construction loan | Land or subdivision |
| A contracted buyer who already chose finishes | Custom / construction-to-perm elsewhere | Spec |
| A standing house that needs rehab | Fix and flip | Spec |
| Acreage with no recorded lots | Vacant land | Spec |
| Streets and utilities still to build | Subdivision financing | Spec |
| A purpose-built rental pod, not one MLS sale | Spec / BTR for builders | One-lot spec |
| $900K-plus finished value, thin buyer pool | Luxury new construction | Standard spec |
| First vertical, thin builder resume | Ground-up with no experience | Repeat-builder spec |
If two rows both feel true, pick the earlier phase. We can sequence later. We cannot pretend unplatted acreage is a house loan.
A presale (a buyer under contract before CO) reduces carry risk. It is not required on qualified investor files. If you have one, bring the contract. If you do not, bring comps and a days-on-market plan that survives a slow season.
National terms — then the two caps
Draw-by-draw mechanics live on how construction loans work and the new construction investment property guide. The settings that size a Jaken Finance Group spec file:
| Parameter | Setting | National note |
|---|---|---|
| Rate | 8.99%–13.5% interest-only on the drawn balance | Priced to sponsor and file |
| Term | 12–18 months IO; extensions available | BTR verticals can run 12–24 months — that is a different product |
| LTC — qualified files | Up to 100% LTC on qualified files | Still cannot beat the value cap |
| LTC — general investor | Up to 90% LTC | Most one-lot investor specs |
| LTC — repeat spec / BTR builder | 70%–80% LTC | Track record and sell-out history |
| LTC — first vertical | 65%–75% of cost | Pair with no-experience ground-up |
| As-completed cap | Up to 75% LTARV | We fund the lower of LTC and LTARV |
| Contingency | 10%–15% of hard-cost budget | Winter, coastal insurance, and long permits argue for the high end |
| Interest reserve | 2–4 months typical; ~6 months first-time or winter/long-permit | Charged on draws, not the unused commitment |
| Draws | 5–7 on a $500K-plus vertical | Never more than 20% before foundation inspection |
| Draw funding | 48–72 hours after third-party inspection | Change orders need paper before the next draw rises |
| Close | 10–14 business days | Clock starts when appraisal payment and conditions are in |
| DSCR takeout | 5.75%–10.5%, typically 70%–75% LTV | Just-completed specs are not seasoned rentals |
Two rules carry most of the file. First, we fund the lower of LTC and LTARV. A cheap lot with a fat vertical usually binds on cost. An expensive lot with a modest house usually binds on the 75% value cap. Second, we do not front-load more than 20% of the budget before the foundation inspection. Dirt and hopes are not a house.
How the two caps actually bind
Loan-to-cost is a share of land basis plus vertical budget. Vertical means hard cost, soft cost, and a 10%–15% contingency on the hard-cost line — not a vibe.
Loan-to-as-completed value is 75% of supported finished value from comps of the same product, finish, and school or location tier.
“Up to 100% LTC on qualified files” is real. It still loses to 75% of value when that number is lower.
Worked file A — production infill, cost and value almost tie
Illustrative. Your bids and comps replace these numbers.
| Line | Amount |
|---|---|
| Lot basis | $95,000 |
| Hard cost | $250,000 |
| Soft cost (plans, permits, utilities, insurance) | $30,000 |
| Contingency 12% of hard cost | $30,000 |
| Total cost | $405,000 |
| As-completed comps | $485,000 |
| 75% LTARV | $363,750 |
| 90% LTC | $364,500 |
| Loan (lower of the two) | $363,750 |
| Cash to close | $41,250 plus reserves |
A first-time sponsor on the same dirt at 70% of cost sees a $283,500 loan and about $121,500 cash. The lot did not change. The resume and liquidity did.
Worked file B — land-heavy lot, value cap wins by a wide margin
| Line | Amount |
|---|---|
| Lot basis | $280,000 |
| Hard cost | $180,000 |
| Soft cost | $22,000 |
| Contingency 12% of hard cost | $21,600 |
| Total cost | $503,600 |
| As-completed comps | $580,000 |
| 75% LTARV | $435,000 |
| 90% LTC | $453,240 |
| Loan (lower of the two) | $435,000 |
| Cash to close | ~$68,600 plus reserves |
The lot is more than half of cost. 90% of cost is not available because 75% of finished value is lower. That is the teardown pattern in high-basis neighborhoods — the same logic the Illinois spec guide and Texas spec guide apply to local land, without copying their fee tables.
Interest carry — what the coupon actually costs
Interest is charged on the drawn balance. A $363,750 commitment is not $363,750 outstanding on day one.
Illustrative at 11% interest-only (inside the 8.99%–13.5% band) on File A:
| Month | Approximate outstanding | Monthly IO at 11% |
|---|---|---|
| 1–2 (site / foundation) | ~$70,000 | ~$640 |
| 3–6 (frame / dry-in / MEP) | ~$200,000 | ~$1,830 |
| 7–10 (finish / CO) | ~$340,000 | ~$3,120 |
| 11–12 (list / punch) | ~$363,750 | ~$3,330 |
Twelve-month carry on that curve is roughly $22,000–$26,000, not $40,000. If permitting slips 90 days before the foundation draw, you still owe taxes, insurance, and idle lot carry — and the interest reserve you booked at 2 months is gone. That is why first-time and winter-climate files should model closer to 6 months of reserve, and why northern Q4 starts belong on a longer clock. See the Illinois spec winter note and the Colorado spec tap-and-weather notes when those jurisdictions are the risk.
Add property tax and builder’s risk for the full hold. A January 1 assessment that picks up the finished house — common in Texas appraisal districts — can double the tax bill in year two. Model the post-CO bill, not the vacant-lot bill. The Texas spec construction guide walks that calendar.
Draw sequence and the 20% rule
Plan 5–7 draws on a $500K-plus vertical. Typical gates:
| Draw | Gate | What the inspector is looking at |
|---|---|---|
| 1 | Site / foundation | Footings, slab or basement, utilities in |
| 2 | Framing / dry-in | Structure, roof, windows, dried in |
| 3 | MEP rough | Mechanical, electrical, plumbing rough-in |
| 4 | Drywall / exterior | Insulation, drywall, siding or masonry |
| 5–6 | Finish | Interior finish, remaining exterior |
| Final | CO | Certificate of occupancy, punch, remaining retainage |
We never advance more than 20% of the budget before the foundation inspection. A large “mobilization” draw that funds the whole lumber package before there is a foundation is how files stall with a hole in the ground and no house.
Draws fund 48–72 hours after a passing third-party inspection. Change orders need paper before the next draw amount goes up. Scope templates: how to submit a scope of work and the draw process.
If the original lender already stopped funding a half-built house, that is mid-construction refinance — remaining-work draws, not a new spec start.
Timeline from contract to CO
A clean, entitled lot in a fast suburb can look like this. A city teardown will not.
| Phase | What has to be true | Why files slip |
|---|---|---|
| Lot control | Deed, option, or purchase contract | You cannot size a loan on a lot you do not control |
| Plans | What the city will permit | Pinterest boards are not a plan set |
| GC | Licensed, insured, contracted | “GC TBD” is a stop |
| Appraisal / as-completed | Same-product comps | Wrong house type kills value |
| Close | Title, entity, insurance, reserve | Missing builder’s risk delays funding |
| Demo (if teardown) | Separate permit, utility disconnects | Dead carry between wrecking and vertical |
| Vertical | Inspection calendar | Weather, failed inspections, sub no-shows |
| CO | Punch and municipal sign-off | Punch lists eat the last 30 days |
| Exit | List or lease | Modeling zero days of post-CO carry is fiction |
Budget 60 days of carry after the last draw on a retail sale. Luxury finish and thin buyer pools need more — see the luxury spec exit playbook.
Teardown sequencing is its own loan problem. You often close the lot, pull a wrecking permit, sit through utility disconnects, then convert or reopen into vertical. If you need to buy the house-plus-lot before demo, that first close can be a bridge or land-plus-demo advance, then construction. Do not pretend the wrecking permit is the building permit.
What underwriting actually reads
Bring the file, not a pitch deck.
- Lot control — deed, option, or purchase contract. Entitlement must match the plans.
- Sealed plans — what the city will permit.
- Licensed GC contract — hire first. We will check license class against project value where the city licenses by class.
- Line-item budget — hard, soft, and 10%–15% contingency already on the hard-cost line.
- As-completed comps — same product, same finish and location tier. Do not import a different house type.
- Exit — list price and days-on-market plan, or rent, taxes, insurance, and a DSCR worksheet.
- Entity and liquidity — LLC docs, interest reserve, tax and insurance carry through CO.
- Builder’s risk and GC insurance — in force at close, lender named as required. State texture lives on guides such as the Indiana builder’s risk guide and the Florida hurricane builder’s risk guide.
We underwrite this build. Banks often want a stack of prior certificates of occupancy. Experience helps. A complete package on one house can still close. First verticals that still look thin should read ground-up construction with no experience before they apply.
Two exits — run both before you pour
Retail sale. List after CO. Model commission, concessions, and 60 days of post-draw carry. If the buyer pool is thin or the list is $900K-plus, you are on luxury new construction, not a production spec.
Hold as a rental. Lease, then DSCR at 5.75%–10.5%. Just-completed specs take out at 70%–75% LTV. Do not model 85% permanent debt on a house that received a certificate of occupancy last week.
Illustrative DSCR takeout on File A at 72% LTV:
| Line | Amount |
|---|---|
| Finished value | $485,000 |
| DSCR loan at 72% | $349,200 |
| Illustrative P&I at 7.25% 30-year | ~$2,380 |
| Taxes + insurance (illustrative) | ~$450 |
| PITIA | ~$2,830 |
| Rent that clears 1.0 DSCR | ~$2,830+ |
If market rent is $2,400, this house does not take out as a rental at that leverage. You sell, you add cash, or you do not start. Builder communities that were rental-by-design from day one belong on spec / BTR financing and build-to-rent programs.
Bank construction vs this product
| Typical bank construction | Jaken Finance Group spec | |
|---|---|---|
| Occupancy | Often owner-occupied or presale | Non-owner-occupied investor only |
| Resume | Prior COs required | This file can carry a first vertical |
| Buyer contract | Often required | Optional |
| Advance | Cost-based, slow inspections | Lower of LTC and 75% LTARV; 48–72 hour draws |
| Rate / term | Bank construction pricing, 9–12 months common | 8.99%–13.5% IO, 12–18 months |
| Close | Weeks to months | 10–14 business days on a complete file |
| Exit | Sale to the contracted buyer | Sale or DSCR at 70%–75% LTV |
Institutional overlays that decline “ground-up not supported” or “no builder resume” are a product redirect, not dead land. See backup lender after institutional decline.
What kills spec files
- Owner-occupy intent. We do not fund a house you will live in.
- Acreage with no plat. Use vacant land or subdivision first.
- GC TBD. There is no inspection counterparty.
- No contingency. We will add 10%–15% or pass.
- Wrong comps. A ranch set does not support a two-story spec.
- Zero post-CO carry. Lists do not fund the day the sticker goes up.
- 85% DSCR takeout on a new CO. Use 70%–75% LTV.
- Four-to-twenty homes on one pad. That is community build construction.
- Backyard cottage or garage conversion. That is ADU construction.
- Half-built, lender walked. Mid-construction refinance.
Spec programs by market
National terms are the same. Permit clocks, taxes, insurance, and comps are not. Use the state guide when the jurisdiction is the risk:
- Illinois spec construction — Chicago teardown vs collar land-cash
- Indiana spec construction
- Florida spec construction
- Georgia spec construction
- North Carolina spec construction
- Colorado spec construction
- Texas spec construction — DFW and Austin MUD/PID and January 1 reassessment
- Washington DC spec construction
City construction pages for Chicago and DC add permit texture: new construction loans Chicago · new construction loans Washington DC.
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New construction application · Submit a scenario · Pre-qualify · (833) 264-7776
Rates, terms and conditions offered only to qualified borrowers and are subject to change at any time without notice. Closing times are in business days and commence upon receipt of appraisal payment and satisfaction of borrower conditions. All loans are subject to full underwriting for loan approvals. Jaken Finance Group only finances non-owner occupied investment properties.