Builders / Construction Loan Financing

Possible Construction Loan Steps:

1) First you will need to provide plans, specifications, and a fixed price builder contract. If you are acting as your own contractor you will need to provide a cost breakdown plus subcontractor's bids/fixed price contracts to a lender.

2) Prior to disbursement of funds, you will need to provide: a copy of the building permit and hazard/builders risk insurance. Prior to your loan's conversion to permanent financing lender may require updated hazard insurance, well certification, a final survey, and the use and occupancy certificate. Other items may be required depending on the type of construction and permanent loan selection.

3) Your disbursement funds are handled either by a Title Company or Settlement Attorney.

4) Draw Schedule: The "Draw Schedule" details the amount available to be disbursed and requirements that need to be met throughout the construction process. Generally, there are 3 to 6 draws. Draws are disbursed by the Title company after inspection by the appraiser to verify the work. You will receive a draw schedule prior to closing.

Draw Schedule Possible Outline:

a).. First Draw (Slab/Foundation) 15% . This draw will purchase land if not owned. The draw is released at closing. Any builder "soft costs" such as permits are added to this advance. Septic and any site work is also included. The loan fees, attorneys fees, title insurance, etc. are paid at closing.

b).. Second Draw (Framing/Rough Carpentry) 10% This draw is released when foundation is poured. First floor walls and sub flooring in place with exterior walls sheathed.

c).. Third Draw (Roof/Mechanicals) 20% The draw will include second floor sub flooring and walls, roof framing, rough plumbing electrical and HVAC inspected, and any miscellaneous items like garages and pools.

d).. Fourth Draw (Exterior/Interior Finishes) 20%. The draw includes doors and windows installed, drywall installed, exterior siding or painting complete

e).. Fifth Draw (Trim-out) 20%. Draw includes all interior trim, cabinets, paint and final plumbing HVAC and electrical

f).. Final Draw (Project Closeout) 15% Draw includes all decks and patios, house cleaned. appliances , and any landscaping. The final inspection and occupancy permits are issued.

5) Your funds are disbursed by check to either you and your builder jointly, you, or your builder.

6) How you will pay for the cost: Payments are interest only based on the outstanding balance and are due on the first of each month. For example: a bill is mailed to you 15 days before the payment is due.

7) Modification: Modification is the process of converting your construction loan into the permanent loan of your choice after construction is complete.

8) Loan Options: There are many other loan options available. Please discuss this with your lender.