The short answer
A residential development package shows the entitlements, a budget for the land work and the houses, a sales and absorption schedule, the release price the lender is repaid from each sale, and the builder's record. Banks work under supervisory loan to value limits of 65 percent for raw land, 75 percent for land development and 85 percent for 1- to 4-family residential construction, and report 1-4 family construction on its own call report line.
What the lender is deciding
A developer borrows to turn land into lots, or lots into houses, and repays from sales. The lender’s risk is time. If sales slow, interest keeps running, and the collateral is unfinished ground or unsold houses. So the package is built around three things: the right to build, the cost to build, and the pace of sales.
Banks report this lending in two call report lines. Item 1.a.(1) is 1-4 family residential construction loans. Item 1.a.(2) is “other construction loans and all land development and other land loans,” which is where a lot development loan sits. Together they are part of the $470B FDIC call reports and NCUA 5300, in construction and land loans on this site.
The stages, and which loan pays for each
Stages of a residential project and the usual loan
| Stage | What happens | Usual loan | Supervisory loan to value limit (12 CFR part 365, appendix A) |
|---|---|---|---|
| Raw land | Purchase before approvals or improvements | Land loan, or the developer’s own cash | 65 percent |
| Land development | Grading, streets, water, sewer, drainage. Called horizontal development | Acquisition and development loan | 75 percent |
| Home construction | Building houses on finished lots | Builder line or individual construction loans | 85 percent for 1- to 4-family residential construction |
The limits are ceilings on a bank’s own loan policy and are measured against appraised value. A bank’s actual limits are lower and are not published. See the supervisory loan to value guide.
Raw land with no approvals carries the smallest supervisory limit, and banks lend on it least readily. Many developers buy it with cash or with a seller note and bring the lender in once approvals are in hand.
Part 1: the right to build
- The entitlements: zoning, the plat or site plan the town has signed off on, and every condition attached to it
- The status of each permit still needed, and who issues it
- Utility availability letters and any capacity or tap fees
- Agreements with the town: development agreements, impact fees, required off-site work
- Any bond or letter of credit the town requires for public improvements
- Wetlands, floodplain and environmental reports
- Title, a survey and the recorded or proposed plat
- The homeowners association documents, if there will be one
Approvals expire. Show the expiry dates and what it takes to extend them.
Part 2: the cost
- The land contract or closing statement
- A development budget by line: clearing, grading, streets, curbs, water, sewer, storm drainage, power, landscaping, engineering, fees, contingency
- The site contractor’s bid or contract, and its record
- For houses: plans, specifications and a cost breakdown for each model
- A schedule: when development starts and ends, when the first lots are ready, when houses start
- Sources and uses for each phase
- An interest reserve sized to the sales schedule, not to the construction schedule alone
Phasing matters. A lender would sooner fund 30 lots, see them sell, and then fund the next 30 than fund 90 at once. Bring a phased plan even if you hope to build straight through.
Part 3: the sales
- A market study, or your own evidence: recent sales of comparable lots and houses nearby, with dates and prices
- Competing subdivisions, their prices and how many lots they have left
- An absorption schedule: lots or houses sold per month, and the basis for it
- Lot purchase contracts with builders, with the takedown schedule and deposits
- For houses: signed sales contracts with buyer deposits, and how many houses are unsold
- Price lists by model
Lenders separate pre-sold houses, built under a contract with a buyer, from spec homes, built without one. Most lenders limit how many specs and models a builder may have under construction at one time. The limit is the lender’s policy. Ask what it is.
Looking for a lender now? Find lenders for this in your state or see Construction lenders state by state.
Part 4: the builder and the sponsor
- A list of subdivisions developed or houses built over the last several years: location, number, timing, outcome
- Financial statements and tax returns for the company and each guarantor
- A schedule of all land and houses owned, with loans against each
- Every other builder line and development loan, with the lender, the limit and the amount outstanding
- Proof of the cash equity
- Licenses and insurance
A builder with lines at several banks is normal. The lender will add them up. Give the full list at the start.
How repayment works: release prices
When a lot or house sells, the lender releases it from the mortgage in exchange for a payment called the release price. The release price is usually set above the loan amount allotted to that lot, so that the loan is paid off before the last lots are sold. That gives the lender a margin if the final sales are slow or cheap.
Worked example (hypothetical). A developer will turn 20 acres into 40 lots. The land cost $800,000 and development will cost $2,000,000, for $2,800,000 in all. The appraiser values the 40 finished lots at $100,000 each to a single bulk buyer over time, or $4,000,000.
Loan. Say the bank lends 65 percent of the finished value, which is $2,600,000, but not more than 75 percent of cost, which is $2,100,000. The loan is $2,100,000 and equity is $700,000.
Loan per lot. $2,100,000 divided by 40 is $52,500.
Release price. Say the bank sets it at 125 percent of the loan per lot: $65,625. The loan is repaid after 32 lots ($2,100,000 divided by $65,625). The last 8 lots are free of the loan.
Pace. A builder has contracted to take 4 lots a quarter at $100,000. Thirty-two lots take 8 quarters, so the loan runs about two years after the lots are finished, plus the development period. The interest reserve has to cover that whole time on a declining balance.
If sales slow by half, the loan runs four years after completion, and the reserve runs out. That is the case the lender will ask about.
The percentages and the pace are this example’s assumptions, not any lender’s terms.
Improvements, bonds and the town
Towns commonly require a developer to post a bond or letter of credit to assure that streets and utilities will be finished. The lender needs to know what was posted, by whom, and when it is released. A payment and performance bond from the site contractor is a separate thing, and some lenders require it on larger jobs.
Where SBA fits, and does not
SBA’s standard programs are not a source for this work. The SOP lists “building homes for future sale” as an ineligible use, with an exception for the 7(a) Builders CAPLines program. See SBA CAPLines. A bank that is an SBA lender can tell you whether it uses that program.
Finding lenders
Bank pages on this site split construction loans held into 1-4 family construction and other construction and land. A bank with a large 1-4 family construction balance for its size is a bank that lends to home builders. That is the most direct public signal for this kind of loan, and it comes straight from item 1.a.(1).
Its limits: the balance is what is outstanding on the report date, and builder loans turn over quickly. And it says nothing about lot development, which sits in the other line with commercial construction.
No public file lists these loans one by one. HMDA excludes temporary financing and loans on unimproved land.
Want a person to check the public record for a residential development loan? Request financing from The Lender Report’s operator. A person replies by email, usually naming lenders that have made loans like yours. It is free, it covers business and investment property loans only, and nothing is sent to a lender.
What the public record can and cannot tell you
It can: show which banks hold 1-4 family construction loans and which hold other construction and land loans, how those balances have changed, and each bank’s capital.
It cannot: separate lot development from commercial construction, show a bank’s limits on spec homes, or tell you whether a bank is adding builder customers.
Questions to put to the lender
- Do you lend on lot development, or only on houses?
- How many spec and model homes will you fund at one time?
- How do you set release prices?
- Will you fund in phases, and what triggers the next phase?
- What guaranties do you require, and from whom?
- How do you count land I already own?
Terms used here
- Entitlements: The government permissions a site needs before it can be built on, such as zoning, plan sign-offs and permits.
- Horizontal development: The work that turns raw land into buildable lots: grading, streets, sewer and water lines and utilities, before any building goes up.
- Finished lots: Lots with streets and utilities in place, ready for a building to be started.
- Lot takedown: A builder's purchase of finished lots from a developer in batches on a set schedule, in place of buying them all at once.
- Spec home: A house built before any buyer has signed a contract for it, so the loan is repaid only when a buyer is found.
- A&D loan: One loan that pays to buy land and to develop it into finished lots.
- Land loan: A loan to buy land that has not been developed, repaid from other income or from a later sale or development loan.
- Absorption: The pace at which a market leases or sells available space, lots or homes over a set period.
- Construction loan: A short-term loan that pays for building or renovating a property, advanced in stages as work is finished and repaid from a sale or a permanent loan.
- Construction draw: One advance of construction loan money, released after the lender confirms that the work it pays for is in place.
- Payment and performance bond: Two surety bonds on a construction contract: one backs payment of subcontractors and suppliers, the other backs completion of the work.
- As-complete value: An appraiser's estimate of what a property will be worth on the date construction is expected to be finished.
- ADC loan: A loan to acquire land, develop it or build on it, repaid from the sale, lease-up or refinance of the finished project. Banks report these as construction, land development and other land loans.
- SBA CAPLines: SBA's 7(a) lines of credit for short-term operating needs, in four types: Working Capital, Contract, Seasonal and Builders. The most for one line is $5,000,000.
Sources
Every rule and outside figure above comes from one of these, opened on . Dates are the source's own. Figures from this site's data carry their own source and date beside them.
- 12 CFR part 365, appendix A, Interagency Guidelines for Real Estate Lending Policies (supervisory loan-to-value limits), retrieved .
- FFIEC 051 instructions, Schedule RC-C, items 1.a.(1) and 1.a.(2) (hosted by the FDIC), dated .
- Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices, 71 FR 74580, dated .
- SBA SOP 50 10 8.1, Lender and Development Company Loan Programs (ineligible uses; Builders CAPLines), dated .
Next step: check the record
- Lenders for constructionBanks and credit unions by construction and land loans held. Bank pages split 1-4 family construction from the rest.
- Loan Comps for residential developmentBanks that hold 1-4 family construction loans in a state and are large enough for this amount.
- Lenders by construction and land loans heldBalances from call reports. A balance held, not loans made.
Keep reading
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- Deal summary builder: Turn the facts of a deal into a clean one-page summary you can copy or print. Nothing is saved or sent.
- Construction loan package checklist: A construction lender is lending against a building that does not exist yet. The package has to show what it will cost, who will build it, where every dollar comes from, and how the loan gets repaid when it is done.
- Supervisory loan to value limits and HVCRE, explained: Two federal rules shape how much a bank will lend against real estate: a table of loan to value ceilings, and a capital rule that makes some construction loans cost the bank more to hold.
- The CRE concentration guidance, explained: Bank regulators watch how much commercial real estate a bank holds against its capital. The guidance sets two screens. It does not set a limit, and it does not count owner-occupied buildings.
- Guarantor strength and recourse, explained: A guaranty is the lender's second way out. Whether you sign one, how much it covers and what the lender checks before accepting it shape a commercial loan as much as the rate does.
- How to read a bank call report as a loan searcher: Every bank files a call report each quarter. One schedule in it lists the bank's loans by kind. Read that schedule and you know what the bank holds. You still do not know what it made last quarter.
- How to pick banks for a deal with public data: Public filings cannot tell you which bank will say yes. They can tell you which banks are large enough, already hold loans like yours and lend where the property is. That is enough to turn four thousand banks into six phone calls.
Questions people ask
What is an A and D loan?
An acquisition and development loan. It pays for the land and the work that turns it into finished lots: grading, streets, utilities and drainage. It is repaid as the lots are sold to builders or as houses on them are sold.
Do home construction loans count toward a bank's commercial real estate concentration?
Yes. The 2006 interagency guidance defines commercial real estate loans to include land development and construction loans, including 1-4 family residential construction. They count toward the 100 percent construction screen.
Can an SBA loan pay for building houses to sell?
Generally not. The SOP lists building homes for future sale as ineligible, except under the 7(a) Builders CAPLines program, which has its own rules.
Cite this
Source: The Lender Report, Residential development loan package checklist, https://lender.report/guides/package-checklist-residential-development/, data as of November 11, 2026.
General information, not legal, tax or credit advice. A lender's own policy decides what it will do; ask it for the policy in writing.
Source and date appear beside each figure. Banks report balances, not loans made. Loans made come only from HMDA and SBA files. We do not audit filings and can make errors joining them. Report a problem