Spec loans are used when a builder, developer or investor does not have a specific buyer lined up for purchase of their completed project. “Spec” is short for “speculating” because the builder or investor is operating under the speculation that they can sell the property for a profit. According to eConstructionLoans.com, “For this reason, the builder or investor is not expected to have debt ratios calculated with them carrying this loan. Bank SPEC construction loans will require tax returns, but the analysis of those is generally limited to trying to determine if the guarantor(s) have enough income to meet their own obligations during construction and marketing time.”As with other loans, interest rates and terms are determined and agreed upon by both parties prior to and funds being lent. Interest rates will vary by market and lender, while credit worthiness is generally not considered with spec loans.