Ground-Up Site Selection Checklist for Construction Loans

You spot a cheap infill lot. The numbers look great until you learn the sewer is 300 feet away and the soil is soup. Profit disappears fast when a site fights you. Smart site selection keeps surprises low, lenders happy, and margins intact.

Profit starts with the right dirt

Ground-up development lives or dies at the site level. Bad soil, missing utilities, or slow zoning can kill a deal. Your first job is to filter fast, then verify with tight site due diligence.

Use these fast market filters before you walk the site:

• Days on market for new builds under 45 days within 1 mile.
• Sale price to build cost spread of 20 percent or more.
• Zoning allows your plan by right. No variances needed.
• Minimum lot width and setbacks fit your footprint with room to stage.
• Utilities at the lot line or within 100 feet, confirmed in writing.
• No floodplain overlays. FEMA Zone X preferred.

Then move to a repeatable site due diligence checklist for developers. The goal is simple. Reduce unknowns, lock your budget, and meet construction loan criteria.

Your site due diligence checklist

Soil and slope assessment for construction

Start with the ground. Order a geotech report with two to four borings, 15 to 30 feet deep. Expect $2,500 to $6,000 and a 1 to 2 week turn. You want 95 percent compaction on engineered fill and no expansive clays.

• Target slope under 15 percent for standard foundations. Above 20 percent adds retaining walls.
• Estimate cut and fill. More than 200 cubic yards can swing costs by $8,000 to $20,000.
• Look for perched water, organics, or rock. These drive change orders.

Zoning and entitlements checklist for investors

Read the code, not a listing. Confirm use, height, setbacks, lot coverage, and parking with the planner. Get it in an email. By-right approval saves months and legal fees.

• Check overlays and design districts. Extra reviews add 30 to 90 days.
• Verify minimum lot size and width for your plan type.
• Confirm impact fees and school fees. Budget $5,000 to $25,000 per unit.
• Map any required off-sites like sidewalks or curb cuts.

Utility access requirements for building sites

Capacity matters as much as location. Get will-serve or capacity letters for water, sewer, and power. Typical lead times are 2 to 8 weeks. Order early during feasibility.

• Water: flow and pressure test. 1 inch service can handle most SFR builds.
• Sewer: locate the lateral. Camera it if older than 1980. TV cost is $300 to $600.
• Septic: order a perc test. Expect $800 to $1,500 and 1 to 2 weeks.
• Power: confirm transformer capacity. New sets can take 8 to 20 weeks.
• Gas: verify main size and distance. Trenching over 100 feet gets expensive.

Access, frontage, and logistics

Trucks must reach your pad. Confirm legal access, driveway permits, and any load limits. Tight alleys can add crane time or hand carries. Budget staging and fencing early.

Floodplain, drainage, and environmental

Pull the FEMA map. Zone AE triggers elevation and flood vents. That adds cost and time. Order a Phase I if there is any prior commercial use. A Phase I runs $2,000 to $3,500 and takes 10 to 15 days.

Easements, title, and surveys

Order title and a boundary and topo survey during escrow. Confirm no utility or access easement crosses your footprint. Ask for a 3D surface model. It speeds takeoffs and grading bids.

If you need help keeping vendors in line, use our contractor management checklists to keep schedules tight and draws clean.

What lenders look for on ground-up site selection

Good sites close faster. Lenders care about clean entitlements, realistic budgets, and exits. Use these site selection strategies for lenders and you will move to closing faster.

• Permits ready or permit-ready plans. Aim for a 100 percent construction set.
• Licensed GC with a resume of similar builds. Two to three recent projects helps.
• Hard cost budget with a 5 to 10 percent contingency.
• Draw schedule tied to milestones, like foundation, framing, MEP rough, and final.
• As-completed appraisal. Appraiser wants three comparable new builds within 1 mile and 180 days.

Loan sizing uses LTC. Loan to Cost equals loan divided by total project cost. You may qualify for up to 85 percent LTC with up to 100 percent of construction costs funded to a cap of $3,000,000. Borrowers typically need a 620 FICO or higher. Rates depend on your credit, experience, and the deal.

Plan your exit on day one. If you will rent, understand DSCR. DSCR is Debt Service Coverage Ratio. It equals rent divided by the loan payment. DSCR loans may go up to 80 percent LTV with 30-year fixed options and a 660 FICO minimum. If you will sell, pull comps and estimate days on market. Underwrite to a 90 day exit to be safe.

Many builders keep a line-item budget for every deal. Our guide to accurate cost estimates shows how to structure costs and avoid change orders.

A repeatable scoring model for sites

Score each factor 0 to 5. Use green for 4 to 5, yellow for 2 to 3, red for 0 to 1. Walk away on two or more reds unless the spread is huge.

• Soil: 5 for clean borings and low slope. 1 for expansive clay and perched water.
• Utilities: 5 for all at the lot line. 2 if 150 feet away. 0 if offsite main needed.
• Zoning: 5 by-right with no variances. 2 if design review adds 60 days.
• Access: 5 for full frontage and easy staging. 1 for alley-only with load limits.
• Market: 5 for 20 percent spread and DOM under 30. 2 if spread is 10 percent.
• Exit: 5 with DSCR above 1.20 or strong pending sales. 2 if thin demand.

Add the scores. A 24 to 30 is a go. A 16 to 23 needs price cuts or plan changes. Under 16 is a pass unless you control a premium exit.

Timeline that protects profit

Fast is good. Accurate is better. Use this order of operations to cut risk and keep lenders engaged.

• Day 0 to 3: Open escrow with a feasibility contingency of 21 to 30 days.
• Day 1: Order title, survey, geotech, and utility letters.
• Day 2: Meet planning. Confirm use, setbacks, and any overlays in writing.
• Day 7: Get budget from your GC. Include 5 to 10 percent contingency.
• Day 10: Review reports. Rebid any scope that moved by more than 10 percent.
• Day 14: Submit for permits if allowed during escrow.
• Day 15: Engage lender. Provide plans, budget, comps, and GC docs. Many files close in 10 to 15 business days after permits are ready.

If you plan to keep the new build as a rental, read how to compare selling or refinancing to a rental so your exit numbers align with lender tests.

Ground-up site selection for construction loans

Great sites make financing simple. Business-purpose loans do not need tax returns, W-2s, or paystubs. Lenders will still test the dirt, the plan, and the exit. Bring the right proofs and you save weeks.

• Entitlements: approval status and any conditions of approval.
• Plans: full CD set, engineering, and energy calcs if required.
• Budget: signed by the GC. Include trades, permits, fees, and contingency.
• Schedule: realistic timeline. Typical SFR is 6 to 9 months from slab to CO.
• Insurance: builder’s risk and general liability in place before the first draw.

Expect monthly draws or milestone draws. Inspectors visit each draw. Plan for 3 to 5 business days for funding after inspection. Keep photos and lien waivers ready to speed releases.

Frequently Asked Questions

What soil and slope numbers should I target for a cost-efficient build?

A slope under 15 percent usually keeps foundations simple. Order two to four borings, 15 to 30 feet deep, and target 95 percent compaction on engineered fill. If cut or fill exceeds 200 cubic yards, add $8,000 to $20,000 to grading. Avoid expansive clay or perched water that triggers piers or over-excavation.

How do lenders size a construction loan for a new build?

Lenders often use up to 85 percent LTC with up to 100 percent of construction costs funded, capped near $3,000,000. Borrowers typically need a 620 FICO or higher and a 5 to 10 percent contingency in the budget. The as-completed appraisal drives the maximum loan. Provide three new-build comps within 1 mile and 180 days.

What utility items do I need before closing?

Bring capacity or will-serve letters for water, sewer, and power. Confirm tap fees, which often run $5,000 to $25,000 per service, and transformer lead times of 8 to 20 weeks. If on septic, a passing perc test is required. Camera the sewer lateral on older streets for $300 to $600.

How can I prove my exit to a lender?

If you will rent, show DSCR. DSCR is rent divided by loan payment. Many DSCR investors aim for 1.10 to 1.25 coverage, with rental loans up to 80 percent LTV and 30-year fixed options and a 660 FICO minimum. If you will sell, provide comps within 1 mile, a 90 day listing plan, and a sale price to cost spread of 20 percent or more.

What surprises most often kill ground-up profit?

Hidden easements across the footprint, floodplain Zone AE, and wetlands can add 60 to 180 days. Offsite utility extensions over 150 feet can add $15,000 to $50,000. Neighbor appeals or design review can push timelines by 60 to 120 days. Catch these during the first 10 to 14 days of diligence.

Which property types and locations are eligible for financing?

Business-purpose construction loans typically fund SFR, duplex, and townhome projects up to 4 units. Loans may go up to $3,000,000. Diplomat Property Loans is not currently lending in VT, UT, OR, SD, or ND. Ask about timelines in your market. Closings often take 10 to 15 business days with complete permits.

Do I need income documents to qualify?

For business-purpose loans, you usually do not provide tax returns, W-2s, or paystubs. Lenders focus on credit, experience, the site, and the project budget. A 620 to 660 FICO is common depending on the product. Strong plans and permits can shorten closing by 5 to 10 days.

If you want to talk through your specific deal, our team can review your scenario and tell you what fits. Reach out to Diplomat Property Loans to start the conversation.