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Why Taking a Draw for a Construction Loan is So Difficult?

By Ryan Siebert

For a consumer you may think that getting a draw for a construction loan is really not your problem.  The reality is that the quicker your builder can get their money, the quicker your custom built home can be completed.  Today I want to share with you some tips to make sure your lender can obtain their draw for a construction loan funded custom home as quickly as possible.

Follow the Blueprints

When it comes to custom home building the game plan is simple, follow the Blueprints.  It seems simple enough, but the reality is things change.  Hold your builders feet to the fire for documentation of any changes that you discuss.  Never assume that your builder is just a good guy and going to knock your changes out.  More importantly, make sure they document the changes for the lender.  Each lender will be different, but they ultimately are protecting you from giving your lender too much money, without the work being completed.

Sign the Paperwork

No lender in their right mind is going to disburse funds on a construction loan before the consumer has signed off agreeing to the payments.  As a consumer you need to make sure to agree to the payment request as soon as possible.  Now, it is important that you sign off, but don’t do it blindly.  Make sure you understand what work has been completed and what money is being used for.  If you have to, follow up with your builder to ask for details.  Your builder should easily be able to justify asking for payment of $40,000.00 for the foundation, but showing you the foundation.  It isn’t rocket science.  

Pressure Your Lender, Early and Often

Let your lender know that you mean business.  When it comes to construction draws the lender is often out of the picture once your loan funds.  Make sure you talk to your lender and find out who you need to have communication with to assure that the draw process is as smooth as possible.  The honest truth is your builder has zero leverage when it comes to working with your lender.  So if the blueprints are being followed, and the paperwork is correct, then it comes down to the lender to get off of their tail and get that draw funded.  Make sure you know who to contact in the event of a delay.
Your construction loan for your custom built home is not a difficult process when everyone is working together.  Make sure you and your team are on the same page, make sure the paperwork is correct, and make sure you have your lender’s phone number on speed dial. Then you are smooth sailing my friends.