Welcome to “Friday’s FAQ”, a bi-weekly event where we take a couple minutes to answer one frequently asked question about the homebuilding process. This week, we are answering a common question about Construction-Perm Loans.
Q: How are loan draws figured?
A: A good draw schedule balances the contractor’s need to get paid for work done and materials purchased, with the homeowners’ and bank’s desire to not pay too far ahead of what has been completed. On a new home, payments are usually matched to completion (or “substantial completion”) of a particular phase: foundation, frame, drywall, and so on. On a remodel, payments often depend on percentage of completion. It’s important that the homeowner communicate with the contractor to ensure there are no misunderstandings about how and when funds will be disbursed.