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Basic construction loan draw schedule and formula

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Following is the basic formula used in calculating construction loan progress draws:

*1. LAND ADVANCE = up to 50% (**gross) of the current value of the property, or the purchase price when purchased within last 6 months, whichever is less. (rule of thumb: More expensive and/or larger parcels impose a lower land advance percentage due to "land to improvements" ratio. This draw is released at close of loan escrow. The loan fees, escrow fees, title insurance, etc. are taken out of this land advance, up front, at close of loan escrow.

*we can arrange for payment of 1/2 your permits and school fees here

*2.FOUNDATION DRAW = Average usually approximately $10,000.00 to $50,000.00 unless the foundation is engineered or above average in cost in which case this figure might be adjusted. This draw released when the foundation is poured and stripped and all permits paid for and obtained.

*you can add a sub floor and/or top plate draw here

3.ROOF SHEETING = Approximately 40% of the balance of funds after deducting amount of draws 1, 2, and 5. This draw is released upon completion of roof sheeting nailing.

4. SHEETROCK = Approximately 60% of the balance of funds after deducting amount of draws 1, 2, and 5. Draw released upon completion of sheetrock nailing.

*many will have us create a cabinet-trim-doors-paint draw here

*5.FINAL = 20% of the principal amount of the loan plus accrued interest. This draw released when home is complete, finished and turn key. Half this draw can be set up to be released upon for example "all doors, paint, cabinets etc".

Occasionally a borrower will request more than 5 draws. We can create additional draws between some of these 5 basic draws and debit the amount of an additional draw created from the succeeding or next in line draw. There's a small fee charged for each additional draw created of approximately $100 to $150 each, depending in part on how far our inspector must travel for inspections.

* There is little, if any, room for negotiation in draws marked with an asterisk (*), so you can see that additional draws probably could not be inserted between draws 1 and 2 (COE and foundation). i.e. Additional draws are possible after draw #2 (foundation), #3 (roof sheeting) and #4 (sheetrock) from draws #3, #4 and #5. For example, one might wish to have a draw created between roof sheeting and sheetrock at "O.K. to cover" or when insulation is in.

** The loan fee, escrow fee, title insurance, etc. come off the top of the loan, they are taken from the land advance, up front, at close of loan escrow.

Also for your perusal and advance awareness, please see a copy of the form letter we send to anyone subordinating to a loan brokered by us. This letter goes out after loan escrow is opened and prior to close. Borrowers and (potential) subordinators are encouraged to phone Brad Evans (530-272-5916) if they have questions or are in need of more information on the topic of subordination.

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