Without going into a huge amount of detail; the value of the land counts as equity. That's assuming the land has no debt. The ratio of loan to value can vary by bank. Most lenders want to see some cash available to cover any surprises if the loaned money runs out before the house is finished. The appraisal determines the total equity; I bought land 4 years ago for 200,000, but the appraisal may indicate it is worth less now. In many locations, with market values down, you can buy a distressed house for less than it costs to build it. So to get a new house built, you may have to put even more money in. Say you paid 50,000 for land, house of 2000 sf cost 250,000. Appraisal shows value of finished house at 280,000. Bank will loan 70% of value = 196,000. To get house built you need to put in 54,000 and still have some more for emergencies at the end. It all depends on the market and the banks policy. Many banks are not making construction loans at all, let alone MD's.