Construction Loan Approved. Now What?
Once your construction loan has been approved, you will need to provide the following to your construction lender:
Fully executed construction contract
Final budget for the construction draws
Builder’s risk insurance policy – covering the builder
Course of construction insurance policy – covering the property owner
Most lenders will only release funds based on % completion. For example, if you had budgeted $80,000 for foundation, and you’re only 80% done at the time of your construction draw request, the lender will release only $64,000 of your line item for foundation at that draw. And if your foundation actually costs you $90,000, you’ll have to pay that additional $10,000 out of your own pocket.
Some lenders allow for an initial draw for soft costs already paid, and for the initial material purchase. Not much money, but may help you get started.
Many bank construction lenders set a maximum timeframe for the complete draw down of your loan to around 6 months. Consider giving your builder a time-based incentive, if they agree to it.