Texas is where most spec building in the country happens. The state permitted 140,579 single-family units in 2025, 15.4% of the US total and more than any other state, according to the US Census Bureau figures on our 2026 financing data page. That is why our Texas lending starts with ground-up construction rather than flips.
A spec home is built without a buyer under contract. The lender is underwriting your ability to build it for the budget, on time, and sell it for comfortably more than the loan.
The loan, line by line
| Term | What it means |
|---|---|
| Leverage | Up to 85% of total cost (LTC): land, hard costs, soft costs and contingency |
| Loan size | $1M to $5M, business-purpose only |
| Term | 12 to 24 months, written to the realistic build and sale schedule |
| Interest | Interest-only on the drawn balance, typically 9% to 12% (as of October 2026; rates move with the market) |
| Funding | Land at closing, then draws after an inspector confirms each stage |
| Borrower | A US LLC; US and foreign investors on the same terms |
| Fee | 1% to 2% of the loan, paid at closing, no upfront fees |
| First answer | Term sheet in 24 to 48 hours |
How it runs, from lot to sale
What a lender needs at each step is set out in what a lender needs to approve a spec home construction loan.
- Send the lot, plans, permit status, a line-item budget with contingency, the builder and recent new-construction sales nearby
- Receive a term sheet in 24 to 48 hours, sized on cost and checked against the as-completed value
- Close: the land portion funds, and the rest of the budget is held for draws
- Build: request a draw at each completed stage, the inspector confirms the work, funds are released against lien waivers
- Sell the finished home and repay the loan, or refinance it into a DSCR loan up to 80% LTV if you keep it as a rental
Texas rules that change the numbers
| Rule | What it does | What to do |
|---|---|---|
| Retainage (Property Code 53.101) | The owner reserves 10% of the contract price or of the work done, during the work and for 30 days after completion | Build it into the budget and the draw schedule |
| Mechanic's liens | Unpaid contractors and suppliers can file liens on the property | Draws are released against lien waivers |
| Title premiums | Set by the Texas Department of Insurance | Title cost is known before closing |
| Foreclosure | Non-judicial: deed of trust, first-Tuesday trustee sale after 21 days' notice (Property Code 51.002) | Part of why lenders are comfortable with Texas construction |
| Franchise tax | An LLC doing business in Texas files Texas franchise tax reports, whatever its formation state | Plan the LLC's filings with a tax adviser |
| MUD tax | Many new subdivisions carry a municipal utility district tax | Price it into the sale, or into the rent if you hold |
Sell or hold
Most spec loans are repaid from a sale. If you decide to keep the home, a DSCR loan up to 80% LTV, with a 30-year fixed rate available from 6% to 6.5%, can repay the construction loan once it is leased. Test that take-out before the first draw, with the reassessed property tax and any MUD tax in the numbers, so the maturity of the construction loan is never the moment you discover what the rent will refinance.
For several homes built to rent rather than to sell, see build-to-rent in Texas, North Carolina and Georgia. For the Texas program itself, see Texas spec homes and ground-up construction, and for the local picture, Houston, Dallas, Austin and San Antonio.
Builders from outside the US
A non-US builder or investor borrows on the same terms through a US LLC, with no US credit history required. The one difference that matters on a spec home is the sale: when a foreign-owned single-member LLC sells, the buyer generally withholds 15% of the price under FIRPTA, so plan the cash for the next project accordingly.