Most loan requests don't get declined because the deal is bad. They get declined because the request never gave the lender enough to say yes with.
An underwriter opening your email is doing one thing in the first ninety seconds: deciding whether this is worth a full read. If the basics aren't there — cost, value, leverage, delivery, exit, sponsor — the file goes to the bottom of the stack. In a busy quarter, bottom of the stack means dead.
Here's the packet, in the order an underwriter actually works through it.
1. Lead With a Five-Line Summary
Before the pro forma, before the plans, before your bio — five lines.
- Property: 12 Example Street, Anytown, MA — 8-unit ground-up condo
- Total project cost: $4,000,000
- Loan requested: $3,200,000
- As-completed value: $5,400,000 (8 units at $675,000)
- Exit: Unit sales, 14 months from first CO
If your deal can't be described in five lines, it isn't ready to submit. That's not a formatting preference, it's a diagnostic. A deal you can't summarize is usually a deal with an unresolved question buried in it, and the lender will find that question faster than you will.
2. Build the Sources and Uses
This is the most-skipped document and the first one that gets asked for.
A Sources and Uses reconciles what the project costs against where every dollar comes from. If the two sides don't balance, nothing downstream matters. Organize the Uses into four blocks — that's how an underwriter spreads it, and a budget already in that shape doesn't come back with questions.
On the $4,000,000 project above:
- Acquisition — $630,000. Purchase price, acquisition closing costs, and due diligence.
- Hard costs — $2,726,000. Broken out by trade, including a 7.5% contingency. A single "construction — $2.5M" line is the fastest way to get a request bounced back.
- Soft costs — $411,000. Design, engineering, permits, legal, condo documents, insurance, taxes during construction, and a soft cost contingency.
- Financing costs — $233,000. Origination, interest reserve, third-party reports, inspection and draw fees, lender legal and title.
I've written a full line-item template for this — every trade line, every soft cost, and the questions underwriters ask about each one — here: How to Build a Sources and Uses Lenders Won't Question.
What matters for the loan request specifically is the Sources side:
- Senior construction loan: $3,200,000
- — Advance at closing, against land basis: $480,000
- — Construction holdback, funded by draw: $2,720,000
- Sponsor cash equity: $800,000
- Total Sources: $4,000,000
Show the loan split. Lenders fund a portion at closing, usually against land basis, and hold the rest back for construction. Presenting the loan as one number hides whether you actually have enough cash to close — the first thing an underwriter checks.
Equity generally goes in first. Most construction lenders require sponsor equity fully deployed before the holdback starts funding, or funded pari passu at a fixed ratio each draw. Assuming your equity goes in last is a common and expensive planning mistake.
Label subordinate capital honestly. Preferred equity, mezzanine, and seller carry are not equity to a senior lender unless they're structured that way and the senior consents. A source discovered in diligence is far worse than one you disclosed.
Three things that draw immediate scrutiny on the Uses side: land carried at appraised value instead of cost basis, no hard cost contingency, and no interest reserve. Any one of them signals you haven't built before. All three together and the file doesn't get a second read.
3. LTC and LTV Are Two Different Tests, and You Get the Lesser
This causes more confusion than anything else in construction lending, so let's be blunt about it.
Loan-to-Cost (LTC) is the loan amount divided by total project cost. It measures how much of the project the lender is funding versus how much you are.
Loan-to-Value, or more precisely loan-to-as-completed-value (LTARV), is the loan amount divided by the appraised value of the finished project. It measures the lender's collateral cushion.
A lender quotes both. You get whichever produces the smaller loan.
Run the example above:
- Total project cost: $4,000,000
- As-completed value: $5,400,000
- Max LTC at 80%: $3,200,000
- Max LTARV at 65%: $3,510,000
- Maximum loan: $3,200,000 — LTC-constrained
- Sponsor equity required: $800,000
Now change one input. Construction pricing comes back and total cost is $4,600,000 against the same $5,400,000 value:
- Max LTC at 80%: $3,680,000
- Max LTARV at 65%: $3,510,000
- Maximum loan: $3,510,000 — now value-constrained
- Sponsor equity required: $1,090,000
Equity jumps $290,000 from a cost overrun the lender didn't cause and won't fund.
Two things worth saying plainly:
Most declines are equity problems, not leverage problems. "We can only get to $3.2M" isn't a lender being conservative. It's arithmetic. Bring the gap or restructure the deal.
The binding constraint moves. Deals that pencil at signing get value-constrained when costs drift. Know which test is binding on your deal and how much room you have before the other one takes over.
4. The Draw Schedule
Construction money funds in arrears, against work completed and inspected. Almost nobody funds ahead of the work.
Include a line-item draw budget that mirrors your Uses schedule, not a lump sum. The mechanics you should already understand before you submit:
- Acquisition funds at closing. The construction holdback is escrowed and released over the build.
- Draws release on inspection. You submit with lien waivers and supporting invoices; the lender inspects or reviews third-party reports; funds release on percentage complete.
- Retainage. Commonly 10% held back per draw and released at completion or a milestone. Budget for it — your GC will want to know who's carrying it.
- Frequency and fees. Usually monthly, often with a per-draw fee and a turnaround window of a few business days to two weeks. Ask up front. It affects your working capital.
A lender who sees a credible draw schedule assumes you've done this before. A lender who sees "$3.2M construction loan" and nothing else assumes you haven't.
5. Phased Delivery on Multi-Unit Projects
If your project delivers in phases, you need a delivery schedule as well as a draw schedule. They answer different questions.
The draw schedule says when money goes out. The delivery schedule says when units become sellable — which is when money starts coming back.
Lenders care for one reason. On a single-phase project, nothing repays the loan until the entire building is done. On a phased project, Phase 1 units close and start curtailing the balance while Phase 2 is still framing. That's a materially better risk profile, but only if the schedule is real.
What the schedule should show:
- Phase 1 — Building A, 4 units. Construction start Month 1. Substantial completion Month 10. CO Month 11. First closings Month 12.
- Phase 2 — Building B, 4 units. Construction start Month 6. Substantial completion Month 15. CO Month 16. First closings Month 17.
State your absorption assumption explicitly — "1.5 units per month from first CO" — and show the loan fully retired inside the term with room to spare. Model it. If it takes all eight units at full ask to clear the lender, the schedule is too thin.
Where phased delivery changes the loan:
The interest reserve gets bigger, and unevenly. Phase 2 carries debt five or six months longer than Phase 1. Size the reserve off the last unit delivered, not the average. Underfunding the back phase is one of the most common reasons a phased project needs an extension it never budgeted for.
Shared site costs need an allocation. Utilities, paving, stormwater, and landscaping usually serve both phases but get spent early. Show how you're splitting them, because it drives per-unit cost, which drives per-unit release pricing.
Draws often run on separate tracks. Some lenders administer each phase as its own budget with its own contingency and retainage. Ask. It determines whether Phase 1 savings can cover a Phase 2 overrun — frequently they can't without lender consent.
Release pricing should be per unit, not per phase. Allocate the loan across all units by value and set release prices individually. A flat per-phase number lets you sell the good units out of Phase 1 and leave the lender secured by the weaker inventory.
Three gates that slip schedules:
The master deed has to be recorded before any unit closes. On a phased condominium, the master deed must also reserve the right to add later phases, and percentage interests reallocate as each phase comes in. That's condo counsel's work and it starts well before Phase 1 completion, not after. It's on the soft cost schedule above for a reason.
Partial certificates of occupancy are municipality-dependent. Some jurisdictions issue a CO for Building A while Building B is an active site. Others require full site completion — paving, lighting, landscaping, sometimes as-built utility acceptance — before any CO issues. If your delivery schedule assumes phased COs and your building department doesn't grant them, your entire repayment model is wrong by six months. Confirm it in writing during due diligence and put the answer in your submission.
Pre-sale thresholds. Many lenders require a minimum number of units under binding contract before the Phase 2 holdback funds, or before Phase 2 starts at all. Build the marketing timeline to hit it, and be honest about whether the deposits are hard or refundable. Lenders count hard deposits and discount everything else.
Bring the fallback before you're asked. Phased projects go sideways on absorption, not construction. Units get built and then sit. Show a lease-up scenario at market rents with a DSCR calculation, a mini-perm or extension structure, or a bulk-sale floor price. A sponsor who brings the downside unprompted reads as someone who's built before.
6. Condo Release Pricing
On a for-sale condo, units sell one at a time — and each closing requires the lender to release its mortgage on that unit so clear title passes.
The release price is what the lender gets paid to do that. Here's the mechanic that trips people up.
Eight units securing a $3,200,000 loan means a pro rata allocation of $400,000 per unit. But the lender will not release at $400,000. If it did, and you sold your four best units first, the remaining balance would sit entirely on the four hardest-to-sell units — exactly the wrong collateral position.
So release prices are set at a premium to pro rata. Common structures:
- A premium to pro rata, often in the range of 105% to 125% of the unit's allocated loan amount. At 115% on this deal, that's $460,000 per unit — the extra $60,000 per closing retiring the loan faster than the collateral is released.
- A percentage of gross sale price, frequently 80% to 90% of contract price net of ordinary closing costs and commissions.
- A minimum release price per unit, so a discounted early sale doesn't underpay the loan.
- Unit-specific allocations rather than one flat number, where units differ materially in size or value. A penthouse and a garden-level unit shouldn't carry the same release price.
Some lenders layer on more structure: a pre-sale requirement before the holdback funds, a holdback on sponsor distributions until the loan is retired to a threshold, or separate treatment for the model unit and amenity space.
Run the math before you submit. At $460,000 per unit, the loan clears after the seventh closing of eight, leaving the last unit unencumbered. That's a schedule that works. If yours requires all eight units to close at full ask, an underwriter will restructure it for you — usually less favorably than you would have.
Ranges above are typical market structures, not quoted terms. Release schedules are negotiated deal by deal and vary meaningfully by lender, market, and project size.
7. The Sponsor Package
The deal gets you read. The sponsor gets you closed.
- Personal Financial Statement, current within 90 days.
- Schedule of Real Estate Owned, with ownership percentage, current debt, and current value per asset.
- Track record — completed projects with addresses, scope, cost, and sale or refinance outcome. Photos help more than you'd think.
- Liquidity after closing. The number checked hardest. A lender wants to see cash remaining after you fund your equity — commonly benchmarked against a percentage of the loan amount or several months of debt service, in verifiable liquid assets.
- Guaranty structure — who's signing, and whether you're asking for full recourse, partial, or a completion guaranty only.
- Entity documents — operating agreement, certificate of good standing, EIN.
If a piece of this is weak, say so up front with a one-paragraph explanation. Underwriters find everything eventually. A disclosed problem is a condition. An undisclosed one that surfaces in diligence is a credibility issue, and credibility issues kill deals that would otherwise have closed.
8. The Exit
Every construction loan is a bridge to something. Name it, and support it.
Sale exit. Three to five closed comparables, not active listings. Active listings tell a lender what sellers hope for. Closed sales tell them what buyers paid. Include days on market — a $675,000 comp that sat 210 days is a different data point than one that cleared in 30.
Refinance exit. Show the DSCR at a stressed rate, not today's rate. If your takeout pencils at 7% but breaks at 8.25%, the lender will find that. Show it first, with your assumptions visible.
Two exits beat one. A project that can either sell out or convert to rental at a debt-service-covering rent is materially more financeable than one with a single path.
9. Mistakes That Kill Requests
None of these are exotic. All of them are common.
- Budget with no contingency and no interest reserve
- Land carried at appraised value rather than cost basis
- Comparables that are active listings instead of closed sales
- Sponsor liquidity that goes to zero the day the deal closes
- No entity formed, or an operating agreement that doesn't match the guarantors named
- A phased delivery schedule that assumes partial COs the municipality doesn't issue
- A condo release schedule that only works if every unit sells at full ask
- Requesting a loan amount without showing which test — LTC or LTV — produced it
The good news: nearly all of this is reusable. Your PFS, REO schedule, and track record get updated, not rebuilt. The deal-specific work is the Sources and Uses, the draw schedule, the delivery schedule, the comps, and the release pricing. That's a day of work that changes how many lenders will engage and what terms come back.
Let's Price Your Deal
I'm Chris Sava, founder of Hub Financing. I place ground-up construction, bridge, fix-and-flip, DSCR rental, multifamily, condo conversion, and land debt for real estate developers and investors — primarily across New England, and nationwide when the deal calls for it.
I've spent roughly seven years in private lending, including time on the credit and underwriting side of a national construction lender. That means when I quote you, I'm telling you what will actually get through committee — not what looks good in an email.
There's no borrower-side broker fee. I'm compensated by the lender at closing. You get access to the full lender network at the same pricing you'd get going direct, without spending three weeks finding out which lender will actually do your deal.
Send me the address, the total budget, the as-completed value, and your delivery assumptions. I'll come back with structure options — including how the release schedule should be built — before you commit to anything.
Chris Sava | Hub Financing, LLC 25L Inn Street, Newburyport, MA 01950 chris@hubfinancing.com | 978-417-9325 | hubfinancing.com
Hub Financing, LLC is a commercial mortgage broker arranging financing through third-party lenders. Business-purpose loans only. Terms, leverage, and pricing are subject to lender underwriting, appraisal, and final credit approval, and are subject to change. Figures in this article are illustrative examples, not quotes or commitments.