A draw schedule is prepared that provides for periodic payments to the builder based on work accomplished. The draw schedule is negotiated between you and the builder, based upon general industry standards.

Your lender will require that the draw schedule be based upon the builder's actual costs and actual work performed. The ideal draw schedule matches each periodic payment to the builder with the value of work and materials added by the builder.

For example, the first draw of 20% of the construction loan amount may be made when the foundation is completed and the main sub-floor is in place. In a home without a basement, the first draw may be 15%. The idea is to make sure the builder doesn't get more cash from you than the actual work completed. An independent inspector usually certifies to the lender that the builder's work is completed at each draw.

View Sample Draw Schedule

This benefits you, the borrower, in two ways:
· The builder is encouraged to complete scheduled work so he can be paid
(and your home gets done on time)

· The borrower pays interest only on the loan amount advance to pay for actual work completed (and the interest may be tax deductible).

When all construction is completed, a final inspection and appraisal certification is performed. The municipality may perform an inspection and issue an occupancy permit. The construction loan is either paid off with a new permanent loan, or the construction loan is modified to permanent by the lender.

You are now ready to move in and enjoy your new home.