Deal at a Glance
| Loan Amount | $686,200 |
| Property | Ground-up single-family spec home |
| Location | Near Northside, Houston, Texas |
| Transaction | New construction, draw loan |
| Lender | a private construction lender |
| Rate | 9.85% fixed, interest-only |
| Term | 12 months, up to two extensions at lender's discretion |
| Origination Fee | 1.0% of loan amount ($6,862) |
| Construction Holdback | $461,700, released in up to 2 draws ($500 fee per draw) |
| Interest Reserve | $49,399.72 |
| Funds Available at Closing | $175,100.28 |
| Max LTARV | 70% (lower of internal valuation or appraisal) |
| Max LTC | 85% |
| Guarantors | Sponsor (repayment + completion) and a second individual (completion) |
| Closed | Q2/Q3 2025 |
The Deal That Walked in the Door
We are Commercial Lending Solutions, a commercial mortgage brokerage based in Los Angeles, California. Commercial Lending Solutions specializes in ground-up construction financing for spec builders and investors nationwide. This deal came from a builder client based in Cedar City, Utah, financing a ground-up single-family spec home in Houston, Texas (TX), specifically in the Near Northside, a neighborhood just north of downtown that has seen steady infill redevelopment activity. The project needed a private construction lender comfortable funding an out-of-state sponsor building on a single lot, rather than requiring the scale of a multi-home development pipeline to get attention.
Near Northside sits close enough to downtown Houston to attract infill spec buyers, but it is still a market where financing a single ground-up build takes a lender genuinely built for small-balance construction rather than a bank looking for a larger, portfolio-scale relationship.
What Made It Hard
- A single-lot spec build for an out-of-state sponsor. With the ownership entity based in Cedar City, Utah and the property in Houston, the loan needed a lender willing to underwrite a first-time relationship on a single spec home rather than a repeat borrower with an established local track record.
- Structuring the draw schedule and reserve correctly. Getting the construction holdback, draw count, and interest reserve sized right up front mattered, too few draws or too small a reserve would have left the sponsor exposed mid-build.
- A tight execution window. The letter of interest carried its own short acceptance deadline, just two days from issuance, requiring the borrower to move quickly from term sheet to signed acceptance to keep the underwriting timeline on track.
"A single spec home gets deprioritized by lenders chasing portfolio-scale builders. Finding a construction lender whose whole model is built around exactly this size deal is what got this sponsor a workable draw schedule instead of an afterthought."
How We Ran the Process
Trevor Damyan, a California-licensed real estate broker (CA DRE 02244836), placed the loan with a private construction lender, a private construction lender built specifically for spec and rehab building, closing the letter of interest on June 13, 2025:
- $686,200 total loan secured by a first mortgage on the Houston property, structured as a draw construction loan
- $461,700 construction holdback, released in up to two draws at a $500 fee per draw, funding the actual build-out as work progresses
- $49,399.72 interest reserve funded at closing, covering monthly interest payments during construction so the sponsor did not need separate carry capital
- 9.85% fixed rate, interest-only, with monthly payments due in arrears starting the first of the second month after closing
- 12-month term with up to two extensions available at the lender's discretion if the build needed more time
- Underwriting caps of 70% loan-to-after-repair-value (based on the lower of the lender's internal valuation or the appraisal) and 85% loan-to-cost, keeping real sponsor equity in the project at both ends
- 1.0% origination fee ($6,862) plus standard third-party costs, appraisal, underwriting, title, and escrow, totaling roughly $12,646 in estimated settlement costs
- Dual guaranty structure: the sponsor signed both a personal repayment guaranty and a completion guaranty, while a second individual signed a completion guaranty covering the construction obligation specifically
With financing available at closing (after settlement costs) of roughly $175,100, the sponsor had working capital in hand at the start of the build, with the remaining construction budget released through the draw schedule as the home progressed.
Why We Won This One
Small-balance, single-lot spec construction loans are exactly the kind of deal that a lot of construction lenders quietly deprioritize in favor of larger, repeat-borrower relationships. Matching this project with a lender whose entire underwriting model is built around exactly this size and structure, rather than treating a first-time, single-home sponsor as an afterthought, is what got favorable leverage and a workable draw schedule in place quickly.
The other piece that mattered was structuring the interest reserve and draw count correctly from the start. Sizing the reserve to actually cover the construction period, rather than the bare minimum, meant the sponsor was not exposed to a cash flow gap mid-build, a detail that is easy to underprice in a fast-moving term sheet negotiation.
Is This Structure Right for Your Deal?
If you are building a spec home, whether it is your first ground-up project or your fiftieth, the right construction lender is one built for your project's actual size, not one stretching to accommodate it. We arrange construction loans and bridge financing from a network of more than 1,000 capital sources nationwide.
Apply for financing or call us at 310.708.0690 to talk through your construction project.
Trevor Damyan is a commercial mortgage broker at Commercial Lending Solutions with a background in structured finance at CBRE and Marcus and Millichap Capital Corporation. He specializes in bridge loans, construction financing, SBA programs, DSCR loans, and complex capital structures for investors and developers across all 50 states.
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