A Maryland construction loan is a draw-based short-term loan that finances a residential construction or major renovation project in phases. Unlike a standard mortgage or hard money loan that provides a lump-sum amount at closing, a construction loan holds the full renovation or construction budget in a controlled account and releases funds in 4–6 draws as each phase of work is completed and verified by the lender’s inspector. The loan has two components: the land/acquisition component (funded at closing if the investor is purchasing a property) and the construction component (funded in draws). Interest accrues only on the drawn balance. The loan is repaid when the completed project is sold (fix-and-flip exit) or refinanced to a permanent loan (rental hold exit).

Maryland construction loans for fix-and-flip renovation projects typically have 4–6 draws. A 5-draw schedule is the most common for a full renovation: Draw 1 (demo and structural), Draw 2 (rough MEP), Draw 3 (insulation, drywall and exterior enclosure), Draw 4 (finish work), Draw 5 (final completion). Ground-up new construction loans often have 6–8 draws that align to the construction sequence: foundation, framing, rough-in, enclosure, interior rough finish, cabinets and flooring, final and CO. Each draw is released after the lender’s inspector verifies on-site that the specified phase is complete. Draw inspection takes 1–3 days from request; funding takes 1–3 days from inspection approval.

Maryland construction loans typically require a minimum credit score of 660–680, with better terms available at 700+. The credit score requirement is higher than hard money loans (580–620) because construction loans are larger, longer-term, and carry more completion risk than simple acquisition bridge loans. However, like all investment property lending, experience is often more important than credit score: an experienced Maryland investor with a 650 credit score and 10 completed projects is more attractive to a construction lender than a first-time investor with a 720 credit score and no track record. New investors without construction experience should start with fix-and-flip loans on smaller projects and build a track record before pursuing construction loan products.

A mechanic’s lien is a legal claim that contractors, subcontractors and materials suppliers can file against a Maryland property for unpaid work or materials. Maryland’s mechanic’s lien law (Md. Code, Real Property §§ 9-101 et seq.) allows any contractor or supplier who has contributed labor or materials to a property’s improvement and has not been paid to file a lien claim within 180 days of last furnishing work. If the property is sold or refinanced while a mechanic’s lien is outstanding, the lien must be paid or bonded off from the proceeds before the title can transfer clean. Maryland construction lenders require a title insurance policy with a construction endorsement that insures against undisclosed mechanic’s liens protecting the lender’s first-lien position against contractor claims that arise during the construction period.

Yes Maryland construction loans for ground-up new residential construction are available from both local portfolio lenders and national platforms. The underwriting requirements for ground-up construction loans are more stringent than renovation construction loans: the appraiser must value the project from plans and specifications (an ‘as-completed’ appraisal with no existing structure to anchor the analysis), the construction budget must be vetted against local cost databases, and the borrower’s experience and the contractor’s track record are both scrutinized. The construction loan funds from land (if not already owned) through foundation, framing, rough-in, enclosure, interior finish, and final certificate of occupancy. At CO, the investor either sells the completed home or converts to a permanent DSCR or conventional mortgage.

Fix-and-flip loans and construction loans both finance renovation projects with draw-based disbursement, but they differ in scope and structure. Fix-and-flip loans are optimized for speed and efficiency on standard renovation projects ($40,000–$100,000 renovation budgets, 6–12 month timelines) they close in 14–21 days, have streamlined underwriting and typically 3–5 draws. Construction loans are appropriate for larger-scope projects ($100,000+ renovation budgets, 12–18+ month timelines, structural work or ground-up construction) they have more rigorous underwriting (licensed contractor required, detailed as-completed appraisal, construction schedule review), more draws (5–8), and longer terms. A $65,000 Baltimore City gut renovation is a fix-and-flip loan. A $180,000 structural gut-rehab with a major addition is a construction loan.