How Construction Draws Work During a New Build
Unlike a conventional mortgage, construction financing is generally designed around a project that develops over time. Instead of receiving all the money on the first day, borrowers using new construction loans typically access funds through scheduled draws. This approach allows financing to follow the progress of the build from the foundation through completion. The draw process usually begins with an approved construction budget and scope of work. As specific milestones are completed, the borrower requests the funds needed for the next stage. Depending on the lender's procedures, an inspection may verify the percentage of work completed before the draw is released. This creates a connection between the amount of financing advanced and the physical progress of the project. Investors considering residential construction loans should understand the draw schedule before signing the loan documents. A project may require funding for excavation and foundation work first, followed by...