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Construction Loan Pre-Screen ← DealScreen

A construction loan underwriting checklist, run on every ground-up deal

DealScreen Construction reads the development package and tests the parts of a construction loan that decide whether the project gets finished: how much real cash equity goes in before the first draw, who builds it and under what contract, whether the interest reserve lasts through lease-up, and whether the preleasing and permits your policy requires are actually in the file.

For multifamily, industrial, office, retail and mixed-use construction. Draw review after closing is covered by the construction draw review use case.

Screen a construction deal
Cash equity Deferred fees and accrued carry separated from equity that funds before the first draw
Contract type Fixed price, cost plus with a guaranteed maximum, or neither, read from the contract itself
Reserve months Interest reserve tested against the build schedule and lease-up, not the loan term
Preleasing Signed leases and letters of intent counted against your requirement

What is a construction loan pre-screen?

A construction loan pre-screen is the first pass on a request to finance a building that does not exist yet. It checks the credit box, then the completion risks a stabilized loan never has: equity, contractor, budget, reserve, preleasing and entitlements. DealScreen Construction runs that pass as an AI agent on the MightyBot platform, using your construction policy as the rules.

Most construction risk is visible before the first draw

A construction package can look complete and still hide the problems that stall a project a year later. The equity line counts a deferred developer fee. The contractor is the sponsor’s affiliate on a cost-plus contract with no cap. The interest reserve is sized to the build schedule and runs out halfway through lease-up.

DealScreen Construction reads the budget, the contract, the schedule and the leasing file together, so those gaps reach your underwriter as named findings instead of surprises at the third draw.

Screening memo: 96,000 SF speculative industrial, ground-up Illustrative example
Request
$14.8M construction
Market
Phoenix, AZ MSA
Result
Hard stop: contract type
  • Contractor and contract Hard stop

    General contractor shares two principals with the borrower. Contract is cost plus a fee with no guaranteed maximum price. Policy requires a GMP when the contractor is related.

    Construction contract p.1, p.9 · Operating agreement p.3 · Policy 6.4
  • Equity before first draw Flag

    Stated equity of $6.8M includes a $1.4M deferred developer fee. Cash equity is $5.4M against $5.9M required.

    Sources and uses p.1 · Budget line 41 · Policy 5.1
  • Interest reserve Flag

    Reserve covers 14 months of interest at the requested rate. Schedule shows 13 months to completion and 9 months of lease-up.

    Budget line 38 · Construction schedule p.2
  • Preleasing Missing

    Policy requires 25% preleasing on speculative industrial over $10M. No signed leases or letters of intent in the package.

    Leasing file · Policy 7.2
  • Loan-to-cost and budget Pass

    Budget cross-foots at $21.6M, sources equal uses, contingency is 6% of hard costs. Loan-to-cost is 68.5% against a 70% maximum.

    Budget p.1-3 · Sources and uses p.1 · Policy 4.2
Fictional project shown for illustration. Your construction policy, thresholds and document standards drive the real memo.

How DealScreen Construction works

  1. 01

    The development package is read as one file

    Budget, sources and uses, construction contract or bids, schedule, plans and permit status, site documents, leasing file and the sponsor’s financials. Each document is classified and the values your construction policy needs are extracted with their page references.

  2. 02

    Equity is separated from what only looks like equity

    Cash, land contributed at cost or value, deferred developer fees, accrued interest and overhead are each identified in the sources and uses. The cash that funds before the first draw is compared with your requirement.

  3. 03

    Contractor, contract and reserve are tested

    Related-party contractors are found by matching principals across the contract and the entity documents. Contract type, bonding and retainage terms are read from the contract. The interest reserve is recomputed against the schedule plus lease-up at the requested rate.

  4. 04

    Leasing and entitlements are counted

    Signed leases and letters of intent are totaled against your preleasing requirement. Permits are sorted into issued, applied for and not started. The memo lists hard stops, flags and missing items, each linked to its page.

Construction pre-screen checks

What is on a construction loan underwriting checklist?

These are the default checks for ground-up construction requests. Each is a plain-English policy you can edit, with separate profiles for speculative, preleased and build-to-suit projects.

InputWhat DealScreen Construction checksOutput
Sources and uses, budgetCash equity separated from deferred developer fees, accrued carry and land value; equity timing against the first draw; budget cross-foots; contingency as a share of hard costsCash equity result and budget exceptions
Construction contract or bidsFixed price, cost plus with a guaranteed maximum, or open cost plus; contractor related to the borrower; payment and performance bonds; retainageContract type and related-party result
Contractor informationState license status with source and retrieval time; comparable projects completed; bonding capacity where providedContractor summary for the underwriter
Construction scheduleMonths to completion and lease-up against the loan term and extension options; interest reserve recomputed at the requested rateReserve coverage in months, with any shortfall
Leasing fileSigned leases and letters of intent by square feet or units; tenant and term; count against your preleasing requirementPreleasing percentage and missing leases
Plans, permits and site documentsSite control; zoning; permit status by type; flood zone lookup with source and retrieval timeEntitlement status and missing documents
Requested loan and valuesLoan-to-cost against your maximum; loan-to-value against your limit and the supervisory construction limitLeverage result with the policy behind any miss

On a construction loan, most of the risk is completion risk, and it is in the package.

A stabilized loan is underwritten from what a property has done. A construction loan is underwritten from what the sponsor says will happen. The first pass is where those promises are checked against the documents that back them.

Equity that is not cash

Deferred fees, accrued interest and a land value written up to appraisal all fill the equity line. None of them pays a subcontractor. The shortfall shows up when the loan starts funding first.

The contractor is the sponsor

A related contractor on an open cost-plus contract leaves nobody holding the budget. The relationship is often only visible by matching names across the contract and the operating agreement.

The reserve ends before the lease-up does

Reserves sized to the construction schedule run dry while the building leases up. By then the choice is to add debt to the reserve or let the loan go past due.

Why it is different

Completion risk found at intake, not at the third draw

DealScreen Construction prepares the first read. Your construction lending team makes the call, and draw reviews after closing run on their own workflow.

CapabilityTypical first passDealScreen Construction
EquityTotal from the sources and usesCash equity separated from deferred fees and carry
ContractorName and bid amount notedRelated-party match, contract type, bonds and license status
Interest reserveTaken from the budget lineRecomputed against the schedule plus lease-up
PreleasingSponsor’s leasing summarySigned leases and letters of intent counted against policy
PermitsStatus described in the memorandumEach permit sorted as issued, applied for or not started
RecordAnalyst notesA memo with every test, exception and source page

Commercial real estate agents

Agents for the rest of the CRE loan life cycle

Deal screening and underwriting

Closing and loan boarding

Servicing and portfolio

Related pages

How DealScreen Construction connects to the MightyBot platform.

DealScreen Construction runs on the MightyBot platform: plain-English credit policies, document extraction with page citations, and an audit trail for every decision.

Use caseCRE LendingRent rolls, operating statements and appraisals into DSCR, debt yield and LTV under your policy.Use caseConstruction Draw ReviewsDraw packet review, inspection reconciliation, lien waivers, and policy checks.Use caseCovenant MonitoringContinuous borrower reporting, covenant calculations, and breach detection.Use caseFinancial SpreadingNormalize borrower financials for underwriting, covenant monitoring, and risk evaluation.ControlPolicy EnginePlain-English policies compiled into deterministic execution paths.EvidenceData EngineDocument intelligence, canonical extraction, and source evidence pointers.

Run DealScreen Construction on a project you already financed.

We are opening design partner slots for construction lenders and debt funds. Send the original package from a recent construction loan and your construction policy; we return the screening memo so you can compare it with what your team found.

Become a design partner View all agents

Buyer's guide

How to pre-screen a ground-up construction loan request

What makes a construction loan pre-screen different from a stabilized deal?

A stabilized loan has an operating history to test. A construction loan has a budget, a contract, a schedule and a plan to lease. The OCC's Commercial Real Estate Lending handbook says "Construction loans finance the creation of collateral with repayment dependent on the construction completion," and lists the threats, including "Failure of the contractor or a subcontractor to complete construction or complete to specifications" and "Cost overruns due to unforeseen conditions."

Leverage limits still apply. The interagency real estate lending guidelines say internal limits "should not exceed the following supervisory limits," and set the limit for commercial, multifamily and other nonresidential construction at 80 percent loan to value. Most construction lenders also set a loan-to-cost maximum below that.

The completion risks are what a pre-screen adds. Before an underwriter builds a model, the package should answer four questions: how much cash equity goes in first, who builds the project under what contract, how long the interest reserve lasts, and whether the leasing and permits the policy requires are in the file.

What does the guidance say about equity, contractors and interest reserves?

On equity, the handbook says "The bank's policy should state that equity be contributed before disbursements of the construction loan commence," and that "Deferred developer's profit, unearned developer fees, incurred overhead expenses, or interest or other holding fees paid or accrued on contributed land do not contribute to the value of the project and are generally not considered equity."

On contractors, it says "The bank can mitigate the risk of cost overruns by requiring the borrower to enter into a fixed-price contract with the contractor. If the borrower and contractor are the same or are related, the contract should specify cost plus a fee with a guaranteed maximum price." It adds that "a contractor related to the borrower cannot generally be bonded."

On reserves, "An appropriate interest reserve provides sufficient funds to pay interest through the project's anticipated completion and lease-up, sale, or occupancy." On leasing, lenders set "minimum levels of preleasing or sales as a condition of commitment or funding," and determine "whether they represent bona fide commitments."

How does DealScreen Construction screen a construction request?

DealScreen Construction runs on the MightyBot platform with your construction policy written as plain-English rules, with separate profiles for speculative, preleased and build-to-suit projects. It reads the budget, sources and uses, contract, schedule, leasing file, permits and site documents together.

It separates cash equity from deferred fees and accrued carry, matches principals across the contract and entity documents to find a related contractor, reads the contract type and bond terms, and recomputes interest reserve coverage from the schedule plus lease-up at the requested rate. Signed leases and letters of intent are totaled against your preleasing requirement.

The memo lists hard stops, flags and missing items, each linked to the page it came from. Your construction lending team decides whether to pursue the deal. Draw review after closing runs on its own workflow.

What to look for in construction loan pre-screening software

Use these questions when you compare intake and screening tools for construction lending.

  • Does it separate cash equity from everything else?Deferred developer fees, accrued interest and written-up land should be identified so your equity requirement is applied to cash.
  • Does it read the construction contract?Contract type, guaranteed maximum price, bonds and retainage should come from the contract, not the sponsor’s summary.
  • Can it find a related contractor?Matching principals across the contract and the operating agreement catches relationships the package does not state.
  • Does it test the interest reserve against lease-up?Coverage should be recomputed in months from the schedule and the requested rate, including the lease-up period.
  • Does it count preleasing from executed documents?Signed leases and letters of intent should be totaled and compared with your requirement for the property type.
  • Does it stay separate from draw review?Screening happens before commitment. Look for a tool that hands off cleanly to the draw process rather than blending the two.

Summary review, a construction checklist and a construction-aware pre-screen compared

CriterionSummary review of the packageConstruction intake checklistDealScreen Construction
EquityTotal from the sources and uses.Box checked if the amount is present.Cash equity separated from deferred fees and carry, tested against policy.
ContractorName and bid amount.License and insurance collected.Related-party match, contract type, bonds and license status.
Interest reserveBudget line accepted.Reserve amount noted.Recomputed against schedule plus lease-up at the requested rate.
PreleasingSponsor’s leasing summary.Leases requested.Executed leases and letters of intent counted against the requirement.
Permits and siteDescribed in the memorandum.Documents collected.Each permit sorted as issued, applied for or not started, with site control confirmed.
Fits best whenA handful of construction deals a year.Collection is the main gap.Construction volume is growing and completion risk has cost you before.

Sources

Sources and verification

Regulatory references were read in the original documents and last verified September 23, 2026. Production figures come from the named MightyBot deployment.

FAQ

Frequently Asked Questions

What should a construction loan pre-screen check?

Beyond the credit box, a construction pre-screen checks the completion risks: cash equity and when it funds, the contractor and contract type, the budget and contingency, whether the interest reserve lasts through lease-up, preleasing against policy, and permit and site status. DealScreen Construction checks each from the package and cites the page behind every finding.

How do lenders evaluate a construction budget?

They check that the line-item budget cross-foots, that sources equal uses, that hard and soft costs are both covered, that contingency is sized to the project, and that the contractor’s bid supports the hard costs. DealScreen Construction runs those checks and flags lines that are missing or do not tie.

Does a deferred developer fee count as equity on a construction loan?

Most construction policies do not count it, and the OCC handbook says deferred developer’s profit and unearned developer fees are generally not considered equity. DealScreen Construction separates those items from cash equity so your policy is applied to the right number.

How do you calculate the interest reserve on a construction loan?

The reserve should cover interest through completion and lease-up, sale or occupancy, at a realistic rate. DealScreen Construction recomputes coverage in months from the schedule and the requested rate and flags any gap between the reserve and the time the project needs.

What if the general contractor is related to the borrower?

Many lenders then require cost plus a fee with a guaranteed maximum price, because a related contractor usually cannot be bonded. DealScreen Construction finds the relationship by matching principals across the contract and entity documents, and tests the contract type against your policy.

Can AI check preleasing on a construction loan?

Yes. DealScreen Construction reads signed leases and letters of intent in the leasing file, totals them by square feet or units, and compares the result with your preleasing requirement for the property type and loan size. It counts only executed documents unless your policy says otherwise.

Does DealScreen Construction review draws after closing?

No. It screens the request before underwriting. Draw review after closing, with inspection reconciliation and lien waivers, is covered on the construction draw review use case page.

What is on a construction loan underwriting checklist?

The credit box first: property type, size, market and leverage. Then the construction items: a line-item budget and sources and uses, cash equity and when it funds, the construction contract and contractor, an interest reserve that covers completion and lease-up, preleasing or presales against policy, site control, plans and permits, and an as-complete value. DealScreen Construction checks each from the package.

What does a design partner pilot include?

A read-only run on original packages from recent construction loans under your construction policy. You get the screening memos and missing-items requests, and can compare them against what your team found during underwriting and after closing.