Draws

How Funds Are Disbursed to Your Builder

The Draw Process: Protecting Your Investment

When you build a custom home, the lender doesn't simply hand a million-dollar check to the builder on day one. Instead, the funds are held in a construction escrow account and disbursed in stages as the work is completed. This is known as the "draw process." This system is designed to protect both you and the lender, ensuring that money is only paid out for work that has actually been performed and verified.

The Schedule of Values

Before construction begins, your builder provides a "Schedule of Values" or a "Cost Breakdown." This document lists every major component of the build—foundation, framing, plumbing, electrical, etc.—and assigns a dollar value to each. This schedule serves as the roadmap for all future draws.

Requesting a Draw

When a builder reaches a milestone, they submit a draw request to the lender. For example, once the framing is complete, the builder will request the portion of the budget allocated to framing. The request is usually accompanied by a "lien waiver," where the builder and subcontractors confirm they have been paid for previous work, protecting you from future legal claims against your property.

The Inspection

Before any funds are released, the lender sends a third-party inspector to the job site. The inspector's job is simple: verify that the work the builder is asking to be paid for has actually been done. They take photos and provide a report to the lender. If the inspector confirms the framing is 100% complete, the lender approves the draw.

Disbursement of Funds

Once the draw is approved, the funds are disbursed directly to the builder. This keeps the project moving forward and ensures the builder has the cash flow needed to pay for materials and labor. In some cases, a small "holdback" (usually 10%) is kept from each draw and released only after the entire project is finished and the final inspections are passed.

Conclusion

The draw process is a vital part of a successful construction project. It provides a system of checks and balances that keeps the builder accountable and your investment secure. With 26 years of experience, I have managed hundreds of construction draw cycles and can ensure your project's funding is handled with precision and care. Contact me today to discuss how we can finance your next build.

The Draw Process: Protecting Your Investment

When you build a custom home, the lender doesn't simply hand a million-dollar check to the builder on day one. Instead, the funds are held in a construction escrow account and disbursed in stages as the work is completed. This is known as the "draw process." This system is designed to protect both you and the lender, ensuring that money is only paid out for work that has actually been performed and verified.

The Schedule of Values

Before construction begins, your builder provides a "Schedule of Values" or a "Cost Breakdown." This document lists every major component of the build—foundation, framing, plumbing, electrical, etc.—and assigns a dollar value to each. This schedule serves as the roadmap for all future draws.

Requesting a Draw

When a builder reaches a milestone, they submit a draw request to the lender. For example, once the framing is complete, the builder will request the portion of the budget allocated to framing. The request is usually accompanied by a "lien waiver," where the builder and subcontractors confirm they have been paid for previous work, protecting you from future legal claims against your property.

The Inspection

Before any funds are released, the lender sends a third-party inspector to the job site. The inspector's job is simple: verify that the work the builder is asking to be paid for has actually been done. They take photos and provide a report to the lender. If the inspector confirms the framing is 100% complete, the lender approves the draw.

Disbursement of Funds

Once the draw is approved, the funds are disbursed directly to the builder. This keeps the project moving forward and ensures the builder has the cash flow needed to pay for materials and labor. In some cases, a small "holdback" (usually 10%) is kept from each draw and released only after the entire project is finished and the final inspections are passed.

Conclusion

The draw process is a vital part of a successful construction project. It provides a system of checks and balances that keeps the builder accountable and your investment secure. With 26 years of experience, I have managed hundreds of construction draw cycles and can ensure your project's funding is handled with precision and care. Contact me today to discuss how we can finance your next build.